UK defence investment plan ‘raises EU public procurement question’

Dr. Totis Kotsonis of Pinsent Masons was commenting after the UK government published its long-anticipated defence investment plan (81-page / 1.1MB PDF) on Tuesday.

The plan contains the detail on how the UK government intends to invest in defence between now and the end of the decade, by which time it has committed to increase defence spending to 2.7% of UK GDP – up from 2.3% in 2024.

While investment in traditional military personnel and hardware continues to be envisaged, the government’s plan signals a shift in the way it seeks to address risks to UK defence and national security. A significant proportion of the funding it has announced will be focused on drones, AI and other technologies – including uncrewed systems, like the ‘Common Combat Vessels’ it has confirmed will replace the Royal Navy’s current fleet of Type 45 destroyers.

In its plan, the government confirmed it intends to use public procurement tools to catalyse private investment in defence, deliver value for money, and boost British industry and supply chains.

Kotsonis said: “The £900 million promised investment to drive efficiency and reform procurement is welcome and should pay dividends in the form of better procurement processes leading to better value for money defence contracts. The £500 million Transformation Fund will see investments made in AI to drive additional productivity. But the touted 'workforce transformation’ must be carefully managed to ensure it supports the upskilling of the defence procurement workforce without harming morale and worker retention.”

One specific initiative planned is the establishment of a new ‘Multilateral Defence Mechanism’ – an independent international financial institution that the government said can help it and NATO allies engage in joint defence procurement. The UK is currently working with Finland, the Netherlands, among others, on the plans.

The government said: “This independent international financial institution will address our collective challenges in defence procurement by aggregating demand through procurement to achieve better value for money. It will lend to members for joint procurement, stockpiling on members' behalf, and supply chain finance. This mechanism will help member countries improve capability, interoperability and value for money, while giving industry greater demand certainty.”

Kotsonis said: “The government’s announcement that it is contributing an initial £400m to the Multilateral Defence Mechanism signals its strong commitment to this initiative. It will be interesting to see the results of the first joint procurements run under the MDM with Finland and the Netherlands to see if it delivers on the promise of strengthening collective deterrence or is hampered by the problem of ‘too many cooks’.”

"However, there's another important angle here – the question of joint procurement with EU countries is a politically sensitive one. The European Commission has been seeking to incentivise member states to do more in this sphere and has come up with a number of initiatives, including of course the SAFE programme. Collaboration of EU member states with a non-EU member state such as the UK could very well raise questions in Brussels, with the European Commission being keen to ensure that such collaboration is carried out compliantly with internal market rules, including procurement legislation, and does not cut across internal market initiatives,” he said.