Tech test for defence giants: The nature of warfare is changing - firms must adapt, says ALEX BRUMMER
Defence stocks on both sides of the Atlantic are seen as beneficiaries with the US's biggest players Lockheed and Raytheon potentially benefiting from $150billion of Brussels procurement.
BAE last week trumpeted the potential purchase by Turkey of the Eurofighter Typhoon, which is a vital piece of kit for air forces across the globe, supports 21,000 jobs in Lancashire and contributes £1.4billion to UK exports.
The Geelong Treaty, signed between Britain and Australia, will lead to the construction in Barrow-in-Furness and Adelaide of a new class of hunter-killer submarines.
It is again positive for BAE, which operates the Royal Navy shipyards, as well as Rolls-Royce, which manufactures the nuclear turbines that power advanced submarines.
The shrinkage of defence budgets in the post-Cold War era saw a concentration of defence manufacturing capability in few hands.
In Britain, takeovers of UK defence and aerospace groups, including satellite pioneer Inmarsat, has seen the UK's strategic edge blunted.
UK sonar detection systems have played a role in protecting Western shipping in the Red Sea from the Iran-supported Houthi rebels in Yemen.
This valuable tech has ended up in uncertain hands following the takeover by Cobham – Advent private equity in disguise – in July 2021.
Much of the focus as Nato rebuilds its defences and America ratchets up defence spending is on big systems such as carrier fleets, nuclear powered submarines, and advanced fighters.
The awesome capability of America's futuristic, Northrop built B-2 stealth bomber was witnessed in precision attacks on Iran's nuclear facilities in June.
Conflicts in Ukraine and the Middle East dramatically have shown how the nature of warfare is changing.
In much the same way as online interlopers such as Amazon and Microsoft have reshaped the global economy, similar changes are happening in warfare. Elon Musk's Starlink satellites have played a vital role as Ukraine has defended itself from Russian weaponry.
Silicon Valley is on the case. Start-up Anduril is the pioneer of the Roadrunner, which costs a fraction of traditional weaponry, and hunts down and kills enemy drones.
If it fails first time, it tries again using autonomous tech learning. The Roadrunner may not be capable of targeting Iran's nukes but at $100,000 a piece, it could be a much better use of Pentagon defence spending than the £1.5billion B-2 bomber or the £85million F-35B fighters destined for the UK's refreshed carrier force.
BAE, Rolls, Lockheed, Airbus, Northrop et al beware.
Fiscal follies
The Treasury is brilliant at coming up with new ways to raise income. But it is the job of the Chancellor and her advisors to think through the consequences.
Ending the temporary reliefs on the stamp duty paid on house purchases must have seemed a no brainer for saving money.
But someone could have mentioned to Rachel Reeves that it might impact government ambitions to build 1.5m new homes in this Parliament and impinge on efforts to encourage young people on to the housing ladder.
Latest data from property website Zoopla shows stamp duty has been effective in stemming house price inflation with values rising at just 1.3 per cent.
That may seem a good thing but is a poor incentive to housebuilders to put down foundations.
As critically, it is seriously hurting first-time buyers who previously paid lower rates of stamp duty and bought cheaper homes.
Some 41 per cent are now liable to pay stamp duty against just 19 per cent before April 2025. Yet another budget own goal.
Tin hats
As someone soon to head off for a family holiday in Cornwall, I am delighted to see that the National Wealth Fund is to support tin mining at South Crofty in the county with a £28.6million investment.
Rachel Reeves suggests the reopening of the facility could eventually create 1,300 jobs in the region.
It is not quite the high-tech vision of a future Britain expected.
Hopefully, 'responsible mining', as described by the Chancellor, could support green transformation.
Not if the solar panels are built in China.
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