Defence Industries: North-East

Tuesday 13th May 2025 Westminster Hall

16:00

[Wera Hobhouse (in the Chair)]

Luke Myer will move the motion and the Minister will respond. I remind other Members that they may make a speech only with prior permission from the Member in charge of the debate and the Minister. As is the convention for 30-minute debates, there will not be an opportunity for the Member in charge to wind up.

16:01

[Luke Myer (Middlesbrough South and East Cleveland) (Lab)]

I beg to move,

That this House has considered Government support for defence industries in the North East.

It is a pleasure to serve under your chairmanship, Mrs Hobhouse. I am grateful for the opportunity to lead this important debate on how the Government can step up to support the strong defence industry in our region. I thank my hon. Friends here today and the many manufacturers, both big and small, from across the region for meeting me recently to discuss the issues that they face. This topic is of great importance to our constituents and to our nation, and I look forward to hearing colleagues’ contributions.

Last week marked the 80th anniversary of VE Day. It was a moment to remember not only the courage of those who fought on the frontline, but the grit and sacrifice of the men and women who powered our industry at home. The north-east has never stood on the sidelines when it comes to national defence. Our proud industrial capabilities have always served this country well, in times of peace and conflict. Our region forged the steel that built the tanks, ships and munitions during those years. Our docks sent supplies to the front. Our communities gave sons and daughters to the war effort. That legacy is written in the fabric of the towns and villages in our region and it lives on today.

In our region, there are some 2,500 jobs directly in the defence sector and many thousands more in the supply chain. There are large prime contractors—for example, BAE Systems, which has had a footprint in our region since world war one and today employs more than 400 staff in Washington, and the nearby Rolls-Royce, which runs excellent apprenticeship programmes. It was a pleasure to meet one of its apprentices, Lucy from Gateshead, in Parliament recently.

[Jim Shannon (Strangford) (DUP)]

I commend the hon. Gentleman for securing this debate. He is right to underline the importance of the defence sector right across this great United Kingdom of Great Britain and Northern Ireland. Something that is also important and that he has rightly spoken about is the need for apprentices. The Government have given a contract to Thales in Northern Ireland, and through that there will be 200 new jobs and 20 new apprentices. Does he agree that when it comes to defence contracts right across this great United Kingdom, they need to involve apprentices, to build for the future and to ensure that we have those skills?

[Luke Myer]

I absolutely agree. The investment that is coming to Thales will mean thousands of advanced air defence missiles that will be supplied to Ukraine. That is a really important cause, and of course there will be a benefit to the entire supply chain across the United Kingdom as well.

Strong national defence starts well before the battlefield. It is about the skilled workers in our factories—

[Luke Akehurst (North Durham) (Lab)]

It is an honour to serve under your chairship, Mrs Hobhouse, and I thank my hon. Friend the Member for Middlesbrough South and East Cleveland (Luke Myer) for giving way. I wanted to intervene just after his description of the excellent existing capabilities and proud defence industry history in the region, to add the caveat that nowadays, sadly, we have the fewest defence jobs directly supported by Ministry of Defence spending of any of the regions—there are 1,600 according to recent MOD figures—and the lowest amount of MOD spend by region, at £380 million. Those jobs and that spending are obviously welcome, but the figures are below those for the next lowest region, which is Yorkshire and Humber, and in some regions, such as the north-west, which obviously has a significant cluster with BAE, Barrow and things like that, spending reaches £7 billion.

Does my hon. Friend agree that that imbalance represents something of a missed opportunity, given the region’s defence heritage and the passionate, patriotic nature of the workforce, who would probably love to work in the defence industries? Does he agree that we need to ensure that when the increased national spending is rolled out, some of that imbalance is addressed and the north-east is restored to its historical role as one of the flagship regions for defence manufacturing in the UK?

[Luke Myer]

I agree. The increase in defence spending an opportunity to uplift regional economies and tackle regional inequality. However, I do not want to talk down our region because we do have firms, large and small, that are contributing to our national security and industrial resilience, including Babcock in Newcastle, Nifco in Stockton, Merlin Flex in Hartlepool, Draken at Teesside airport, Tees Components in my constituency, and many others. I am proud to champion Tees Components, a family-run business based in the small village of North Skelton. It delivers world-leading precision engineering for projects including our Astute-class submarines. That is our region in action.

[Mr Jonathan Brash (Hartlepool) (Lab)]

I thank my hon. Friend for mentioning Merlin Flex from my constituency. I had the pleasure of visiting Merlin Flex recently, and people there have talked in such positive terms about the growth and expansion that they are seeing. Does he agree that the unprecedented, record injection of cash that the Labour Government are putting into defence has the ability to transform regions such as ours? Does he also think that it is critical that we support the small and medium-sized enterprises that need help to access those funds?

[Luke Myer]

I completely agree. I have one note of caution for our region: although we have fantastic manufacturers and SMEs, it is important for our regional economy—the one my hon. Friend and I share—to have a proper skills pipeline. There is a real job for our combined authority and our mayor to step up and work with education providers to ensure that proper planning is in place. My hon. Friend has a fantastic college in his constituency—Hartlepool college, which has inspirational leadership from its principal, Darren Hankey—but such colleges need to be joined up with local manufacturers, so that there is a proper skills pipeline.

All those manufacturers are vital for delivering local skills. Many of them offer advanced training and apprenticeships and ultimately provide high-quality, well-paid jobs in the areas that need them most. I recently met various manufacturers, both prime and SME, to discuss the issues that they face. They strongly welcome the Government’s decision to identify defence as one of the eight growth sectors in the industrial strategy. One manufacturer told me that it “puts defence in a different place” from where it was before. Manufacturers also welcome the decision to increase defence spending to 2.5%, the strategic defence review, the progress on trade with the US and the decision to step in to save British Steel. This Government are stepping up, not stepping back, and putting our strategic industries on a secure footing.

Just four months ago, I spoke in this Chamber during a debate secured by my hon. Friend the Member for Newton Aycliffe and Spennymoor (Alan Strickland) on the challenges that SMEs face in defence procurement. I called for better access for SMEs to the pipeline. I was therefore pleased to see the Government’s recent commitment to set direct SME spending targets, and I hope that the Minister will provide further clarity on when those will be published. As it stands, SMEs in the defence sector are often contracted for one-off, short-term jobs, and that can create challenges. The unpredictable, project-based nature of the contracts makes it difficult for companies to commit to the up-front capital investment needed to grow.

[Chris McDonald (Stockton North) (Lab)]

My hon. Friend is giving an excellent speech. I want to take this opportunity to thank the Minister for her recent visit to our Teesside defence and innovation cluster, where many small businesses, such as those my hon. Friend described, experience challenges in accessing procurement contracts. Does he agree that it is important for the Ministry of Defence to try harder to engage with small businesses further down the supply chain to help them develop capability, and to create visibility for them so that they can be sure of continuity of contracts and can invest in their own businesses and future growth?

[Luke Myer]

I agree. The best way to ensure that we are building the right approach to procurement is by listening directly to the SMEs that operate on the procurement frontline. I am grateful to the Minister for visiting Teesside to meet the defence and innovation cluster, and for visiting NETPark to meet other businesses. It is clear that she is listening, and that is welcome and appreciated.

[Lola McEvoy (Darlington) (Lab)]

This Government are absolutely determined to reset public procurement for SMEs. In places such as Darlington, we have fantastic SMEs that employ local people, drive local growth, have great terms and conditions, and are a source of local pride. For too long, those SMEs have been missing out because they do not have the bandwidth on a day-to-day basis to put in bids for these contracts, let alone to then offer huge incentives and massive savings, as some of the bigger clients and players in the field can. Does my hon. Friend agree that it would be great to hear from the Minister about the work that she is doing with the Cabinet Office to strengthen public procurement, and to make sure that public money gets into our communities in Darlington?

[Luke Myer]

I thank my hon. Friend for that intervention. By boosting SMEs we boost not only the defence industry, but other sectors, because many of these SMEs are working on dual-use technology, which has a strong crossover with other areas.

Ultimately, growing our sovereign capacity by building more in Britain is a smart and strategic move that will pay off in the long run, both for our national security and our economic growth.

[Alan Strickland (Newton Aycliffe and Spennymoor) (Lab)]

I commend my hon. Friend for this excellent debate and the Minister for the leadership that she is showing—I was grateful for her recent visit to NETPark in Sedgefield in my constituency. Does my hon. Friend agree that there is another significant benefit of more work going to SMEs? Warfare is changing at such a rapid pace that we need to take hold of innovation and the innovative products being delivered by our SME community in Sedgefield and around the country, so that we are battle-ready for the future.

[Luke Myer]

Absolutely. One of those innovative projects in my hon. Friend’s constituency is a semiconductor plant, which the Government stepped up to save with £20 million of investment. That is exactly the kind of active Government and leadership that we need.

The previous Government set up procurement processes with a singular focus, which was awarding contracts to the lowest bidder. That may seem sensible on the surface, but in fact, it has stifled British growth and ultimately cost the taxpayer more. To give an example from Middlesbrough, a local company was forced to step in and finish works that were initially being done by a contractor in south-east Asia, which had been chosen purely because it was the cheapest at the time. Time and time again, we have seen Conservative Governments make decisions on industrial policy that erode our manufacturing base, see jobs disappear overseas and weaken British industry. That Middlesbrough business was there to pick up the pieces and finish the job, but the delay was wholly unnecessary. It ended up costing the British taxpayer more than if we had simply built in Britain from the start.

We need an approach that prioritises British values over mere price. This is about not just securing the cheapest deal but ensuring that every pound we spend strengthens our national security. We must grow our sovereign capacity and put British business first, and support our local economies in the process.

It is also time that we took a more intelligent and long-term approach to defence procurement—one that does not cost us more and builds the kind of capacity that we need here at home, especially in the current global climate. For industries to invest and grow, and train apprentices and support communities, we need to move away from short-term projects and annualised budgets. Businesses need long-term clarity. That will give them stability to plan for the future with confidence.

One SME I spoke to feels that the industrial strategy will help with that, but we can do more to give further confidence to the supply chain, especially through rapid and clear decisions on projects and support for the up-front capital investments that they need to make. This is about investment not only in specialised equipment, but in people. In our region, the jobs in this industry are high-skilled, well-paid and secure, and many of the manufacturers invest strongly in skills and apprentices.

[Lola McEvoy]

In my Darlington constituency, we have a fantastic engineering firm called Cummins. I recently visited the plant, and I want to bring hon. Members’ attention to the fact that they have automated a lot of their processes and, in doing so, have grown their workforce. They have upskilled, reskilled and hired more on the basis of bringing in new technologies. That kind of employment practice is second to none, and we want more of that across our region. As I am sure my hon. Friend would agree, our values around hard graft mean that we are ripe for more defence and manufacturing investment.

[Luke Myer]

I thank my hon. Friend for her intervention, which just goes to show there is a false dichotomy between jobs and automation. A business can be grown well by embracing the future, so I commend Cummins on the work it is doing in her constituency.

The industry needs a strong skills pipeline. There is a role for Government to support these businesses by making sure our workforce has the skills to meet the demands of the coming decades. As I mentioned before, there is also a role for our regional mayors to play in making sure there is a more joined-up local skills landscape and working with education providers and manufacturers to get the best people into the best jobs.

[Sam Rushworth (Bishop Auckland) (Lab)]

I was lucky to go a secondary school that was sponsored by BAE systems, and we benefited from that investment. I am pleased that my hon. Friend is focusing on not only the importance of the Government procuring British, but the social value that employers can add, which includes ensuring that they offer apprenticeships and invest in training. Does he agree that we should be encouraging the Government to prioritise the businesses that demonstrate good practice in these areas?

[Luke Myer]

I agree with my hon. Friend. He and I both worked in the education sector prior to coming to this place and working in policy. It is about joining up those two things, and making sure that people have access to opportunity. So many people across our region have the can-do attitude to succeed, but they are held back by lack of opportunity. Through skills and training we can make sure that they can get into industries such as this, where there are decent well-paid jobs for the future.

One group of people who can bring an extraordinary skillset to our workplaces is veterans. Not only can the defence sector support our armed forces but our armed forces can support the defence sector by establishing routes to civilian employment for those who have served. In my constituency I have recently seen the strength and tenacity of our veteran community. I am grateful to my hon. and gallant Friend the Minister for Veterans and People for coming to my constituency to listen to veterans, particularly on the issue of mental health. Operation Valour, which was announced last week, will help to join up employment, health and other services for veterans across the north-east. I believe that by trusting our veterans and giving them opportunities, we can contribute to their mental health and wellbeing and offer them purpose and community after their service, as well as strengthen our businesses.

This is an important time for the Government to strengthen our defence industry in the north-east. We have already seen the Government stepping up, with £20 million to save the Aycliffe semi-conductor plant, the £173 million contract for Draken at Teesside airport, the creation of steel jobs for Teesside, the £9 billion contract for Rolls-Royce to power Britain’s nuclear submarines, and the clarity brought by the strategic defence review and the industrial strategy. This Government are making significant investments in Britain’s security. By going further for British defence industries, we not only strengthen our national security, but support local jobs and regional growth. There is no better time to act than now, and there is no better place to invest than our region, where we have the track record, the potential and the drive to lead the way.

16:17

[The Minister for Defence Procurement and Industry (Maria Eagle)]

It is great to be here under your chairmanship, Mrs Hobhouse. I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Luke Myer) on securing the debate and shedding light on the vital defence industry in the north-east, and particularly his part of the region.

I thank my hon. Friends the Members for Stockton North (Chris McDonald), for North Durham (Luke Akehurst), for Hartlepool (Mr Brash), for Newton Aycliffe and Spennymoor (Alan Strickland), for Darlington (Lola McEvoy), and for Bishop Auckland (Sam Rushworth) for accompanying him to show the great strength of will among elected representatives in the north-east to boost and push the development of their defence industries. I congratulate them all on the contributions they made. I have managed to visit some, but not all of the constituencies represented here today. I know that people will now ask me to go to the other ones, and we will have to bear that in mind as time goes on.

As we heard today, defence makes a considerable contribution to the north-east in terms of jobs, investment and growth, but my hon. Friends have also made clear that a huge contribution could be made beyond what has already been done. The nation as a whole needs us to boost our defence industries, and this Government are determined to do that. It is clear that the world is becoming much more dangerous and Britain is facing rising threats. At the same time, the Government face the challenge of rebuilding and reinvigorating our armed forces to meet those threats better, after a decade and a half of underfunding and hollowing out.

We are conducting the strategic defence review to assess fully the threats we face and to determine what capabilities we need to meet them. It is also why we brought forward an increase in defence spending to 2.5% of GDP from April 2027, with plans to raise it to 3% in the next Parliament; and it is why we are working hard on defence reform and the new defence industrial strategy. We cannot continue to spend money in the MOD as we spent in the past. We have to get better value. There is no point in increasing spending if we pour some of it down the drain. We have to do things better, and that is what defence reform is about.

The defence industrial strategy is in part about how we can transform procurement to unlock the potential of suppliers across the country. My hon. Friend the Member for Middlesbrough South and East Cleveland spoke about the need for us to do procurement better and reform it. He mentioned some very good small firms, including Tees Components, which I know to a degree. It is a family firm in a small community that does wondrous things.

There is enormous potential in north-east communities for innovation and dual-use technologies, but the way we do procurement now positively excludes small companies from being able to participate, partly because it takes us so long to do it and partly because of the requirements on the firms to prove all kinds of things and produce all kinds of documentation that they do not normally have the staff to produce. BAE Systems might, but a small family firm does not. The system excludes small firms and they end up, at best, in the supply chains of the primes, which is fine as far as it goes, but does not enable them to show us what they can do in terms of agility and innovation.

My hon. Friends will recall the Chancellor’s announcement in her spring statement that we are going to reform defence procurement. Part of that reform will be to speed up getting to contract. The average time to contract is six years, which is ridiculous in the current situation. Procuring a nuclear submarine might take a bit longer than procuring the latest drone, so we are going to segment our procurement arrangements to recognise the fact that not every contract is the same.

We will do this in three layers. One layer will be major programmes, on which we will aim to cut the time to contract from the current average of six years to three years. The second layer is developing new upgrades—a new radar for one of our platforms, for example. For that segment, we aim to get to contract within one year instead of within three. At the faster end—I will not say the smaller end—we aim to get to contract for novel and agile dual-use technology within three months. That will challenge the MOD, but we are determined to do things better and make sure that our spending gets better value and better capability faster into the hands of our warfighters. Many companies in the north-east will be able to benefit from this.

My hon. Friend the Member for Middlesbrough South and East Cleveland will recall that the Prime Minister announced the formation of an SME hub, which ought to enable small firms to plug into the available opportunities and help them to know where to get finance, which is a problem for small firms. We need a clearer idea of what the capabilities are to enable them to plug their ideas and their dual-use technology into the opportunities that are available.

The establishment announced by the Chancellor of UK Defence Innovation, with a £400 million ringfenced budget this year, which has already started, means that there is more money available for dealing with innovative and novel technologies. The Chancellor also committed us to making sure that there is a ringfenced budget that will increase to 10% of our acquisitions budget.

I therefore think the prospect is good for our small and innovative firms. When I go to trade fairs, go on constituency visits and do roundtables to find out what industry wants, I meet many of these small firms from around the country, including the north-east—I have met some on a couple of occasions in the north-east. Many of them say the same thing: “We need a way in. We need to know what you are doing, and what you want and when you want it. And we need to be able to engage faster and more effectively.” I hope that we will be able to do that.

It is going to require wholesale reorganisation, and us to learn how to do things differently, but I will just say to this Chamber and to my hon. Friends that the efforts we have put into supporting Ukraine show that we can do things faster, we can procure better, and we can ensure that we get capability into the hands of warfighters who desperately need it on a much faster timescale than we have done traditionally. The people who have done that are the same people in the MOD who have traditionally done the slower, more long-term, more stately work. It is just about risk appetite and about what we want them to do.

With the strategic defence review publication coming up shortly, in due course, and with the defence industrial strategy also to be published—not at the same time, but not too far away from that—we ought to have an obvious and transparent framework, backed by resources that are guaranteed to be increasing into the future. That is not something that industry has had in the past, which is something that it has always complained about, telling us, “We need a demand signal. We’re not going to invest until we know that you really want this long term.”

I think we will have the kind of ecosystem and opportunities that small firms and large firms in the north-east, in the constituencies of my hon. Friends who are here today, will be able to take advantage of to grow and bring forth their agility, ideas, energy, and patriotism. As my hon. Friend the Member for Middlesbrough South and East Cleveland said, many people in the north-east who work in the defence industry are very proud of doing so and really do want to support our country in its defence and security needs. They will be that much more motivated because there will be more opportunities.

I know that my hon. Friends, who are here in numbers today to represent the north-east, will make sure that I know what the opportunities are in the north-east and what more can be done, and I will rely on them to do that. I cannot get out of the office as much as I might like, so I rely on right hon. and hon. Members to let me know what is going on, what the issues are and what the problems are. I hope that, between all of us, we get into a position to boost our defence industries in a way that not only increases our defence and security, and our ability to deter our potential adversaries and, if needs be, make sure that our warfighters are properly equipped, but leads to regional growth and job opportunities, real lives and careers for our young people and our older people who work in the defence industries and in dual-use technologies, and also enables us to grow our economy as a whole, nationally.

I know that if we get this right and harness the skills, capabilities, commitment, good sense and effort of people who work in the defence industries, we will be in a much, much better place. It is a win-win for all of us—not only for my hon. Friends, but for the north-east and for the nation as a whole.

Question put and agreed to.