Leonardo UK CEO Clive Higgins Talks Re-Arming Britain
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Ready to bring your visions to life? Learn how at AmazonBusiness.com. You've seen a lot of positive sentiment over the last months. Clearly, the backdrop to that is conflict globally, whether that's in the Middle East or in Europe for the first time in decades, of course. So I think society's seen a need to respond to some of these threats. And therefore, governments are very attuned to that.

We've seen a lot of transformation coming through defence in the UK in particular. So you're seeing the structures of defence in government

transforming now. They want more pace. They want more agility. The flow of funding has to be improved. And also recognising that post-COVID, where we recognised that supply chain resilience was a key attribute, we need that in defence as well. So I think the ambitions you've seen from the UK government with announcements on significant increases in defence spending are really positive.

But that needs to translate in terms of reality on the ground. How much does the rhetoric then match the money that's actually being committed in your view? I think it will flow, but it takes time as always because some of those systemic changes that I referenced are only starting to now come through the system. And I think maybe the incoming Labour administration was a little bit surprised at what it found when it came in. It'll be then for them to talk about that. But we

we've needed to increase defense spending for some time, I would say. The threat vector has increased, so that's driven that need to change.

Now increasing to 2.5, potentially 3% in the next parliament. Absolutely critical. And I think what's lost sometimes is the UK does sustain a nuclear deterrent. Many of our peers don't do that. So that takes a significant amount of the defence budget. So when you're looking to recapitalise other programmes, you've got to be cognisant of a lot of expenditure on that nuclear deterrent programme. Yeah.

Leonardo obviously is involved in a number of important projects, including things like GCAP, which is the Global Combat Air Programme, a joint venture with a whole host of other countries and companies. That is a long-term project. We're thinking sort of 2035 for that. In terms of the here and now, can you talk to the size and scope of expected orders for

from Leonardo UK, from the UK government, when do you think those orders are going to come? So GCAP's a live programme now, so we're actively supporting the creation of the systems, the processes, the capabilities. And I think from a Leonardo perspective, we're really pleased because we're the industry lead from an Italian perspective alongside BA Systems and our Japanese partners. But in the UK, we're driving what's called ISANCI, the Integrated Sensors and Non-Kinetic Effects Element.

which is very high skilled jobs across the length and breadth of the UK in Edinburgh and Luton, so on and so forth. So there's funding already flowing through for that programme. And over the next period of time, we'll be setting up the headquarters in the UK as well and bringing together...

from Japan, Italy and in the UK to collaborate there. UK government programmes that are live today are many. We're doing some work with them on the New Medium Helicopter Programme at the moment. That will be a key one for our helicopter division business down in the South West.

And I think very recently we announced that we just responded to the final kind of position of the RFI and our best and final offer had gone in. So hopefully that programme will continue to progress in line with the MOD's stated requirements. But of course, across the spectrum, whether it's support to Typhoon,

or whether it's GCAP or it's maintaining the existing rotary fleet we have in the South West or even the work we do in the cyber division. All of those programmes are continuing. And of course, as we see more activity, particularly to support the Typhoon fleet, for example, with our partners in other organisations, you're seeing an uptick in requirements and spares and having that capability back in the UK to support them, absolutely critical. And that's why I'm really pleased at some of that investment flowing through in terms of jobs and skills.

So we're going to take another 1,000 employees this year alone. Many of those are very high-skilled jobs, which is what the government wants in terms of that growth agenda.

But is that any different than what you might have taken on in terms of workers and young engineers, young employees? I would say it's higher because we look to replace turnover, of course. And because of the sector we're in, you have to have security clearance. So that does restrict the type of demographic we can go for sometimes. But given that flow through of work in GCAP in particular, on top of the continued support for Typhoon,

And I would say thanks to the UK government for the export support as well, because we're seeing a lot of interest in international partners around

typhoon programme, that's driving requirements. So that means that we've got to get the skills on board as quickly as possible. And in the regions that we operate in, that's really important because a number of our sites are located in areas which have challenging social issues. So that investment that we can put into that local community really does have a catalytic effect on what goes on there. Okay.

Okay, perhaps I'll come back to that. Is there some frustration, though, with whether the rhetoric is going to match the money and the action currently? And the government is talking about much more speed.

And yet Europe is talking about huge sums to be invested in European defence spending. Yes, they're coming from further back, maybe nationally. But actually, is there some level of frustration that actually things are not... The rhetoric is there, but the orders and the investment is still a long way off. I think what will be interesting is we're awaiting a number of significant reviews. So we know the Strategic Defence Review is coming. We've got the comprehensive review.

spending review coming, we've got the industrial strategy, defence industrial strategy. So I think my plea would be, let's get those through quickly. There are bound to be some tough decisions for government in terms of spending priorities, whether that be CSR, comprehensive spending review, or defence itself. The ambition is there, but of course, the current funding 2027 is still a few years away.

The challenge will be to maintain and ensure that we've got those capabilities that we need and we're looking to the future quickly. People will talk a lot about autonomy and autonomous capabilities coming through. Well, those types of technologies need developing, they need funding, we need to look at the R&D coming through. So, Leonardo alone last year invested over 500 million in R&D, for example.

That's the type of partnership in government that Defence can deliver now through the Primes, supporting SMEs. So how can we ensure that that funding flow comes through? You mentioned Europe, and I think it's really interesting because from a Leonardo perspective...

We're seeing a lot of collaboration now across the European domain and also slightly outside with Bekar in Turkey as well. But recapitalization of land capabilities for sure. Huge partnerships coming with Ryman Talon in Leonardo around land vehicles.

But we're seeing states like the Germans invest significant amounts in defence and that money starting to flow through, I would say, probably quicker than we would have expected, but it's now starting to happen. The government is insistent on its agenda for economic growth.

almost everything that it does is seen through that lens, including defence. Is it really possible to see it that way? Or does the priority simply have to be on rebuilding the military and defence capabilities and supply chains? You know, if you see everything through a lens of building local jobs, that can...

You can't ride two horses at the same time. I think as always, it's a balance. For sure, I think historically, the approach to defence acquisition has been on a kind of lowest cost approach. What's going to be the least expensive to the taxpayer? I think that approach has its merits, but then...

just takes away from the social impact you can have through good defence jobs. And we see it across the UK now, where you've got an anchor defence industry, you do see wealth generation, you see that interaction with local communities. So we will undoubtedly have to look at capabilities that don't exist on shore and work with partners internationally. But I think we do have to start prioritising

who are those national champions almost in particular capability areas, what are the strategic assets we want to maintain in the UK.

And through existing mechanisms, we have the single source regulations, for example, some great work from the team there, working with SMEs, working with primes to ensure that we're flowing defence spending down into supply chains, keeping that resilient. So there's a balance. But I think, as we testify, if the government invests £1 in Leonardo, you get a £2.40 return. That's Oxford economics standards.

So what that then gives you the ability to export as well, because in the UK you generate intellectual property, which means that you can then export that to international partners.

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