1. News
August 21, 2017

The Ministry of Defence’s funding challenge is more than twice the size of Wales

The Ministry of Defence (MoD) faces one of its most serious “funding challenges” in a generation, according to a senior ‎aerospace, defence & security consultant at PwC, the second-largest professional services firm in the world.

The department’s funding problem, which is close to £30bn, will result in significant cuts in the next few years, warned Roland Sonnenberg.

The cost of new warships, fighter jets, submarines and armoured vehicles have put “acute” pressure on the MoD’s the budget.

It is rare for a senior figure from the defence industry to issue a public warning of this kind.

Sonnenberg’s blog post entitled UK Defence: addressing a funding challenge bigger than twice the size of Wales, was published today.

He wrote:

While the MoD’s own estimates put the magnitude of the funding challenge at £20bn, PwC and other industry observers believe the reality is more likely closer to £30bn over the next ten years, which is equal to twice the planned government expenditure for Wales in 2016/17.

Stephen Lovegrove, permanent secretary at the MoD, launched an efficiency programme in June as part of an effort to save £20bn over ten years.

The MoD is also working on a Cabinet Office review of capability, which is expected to result in cuts or delays to programmes.

Sonnenberg urged the MoD to recognise the scale of the challenge.

He makes a series of recommendations including a re-examination of the cost of equipment and a reduction in the number of service personnel in back-office roles, writing:

The scope for reducing service personnel in back-office functions and for harmonising civilian functions across the armed forces remains a significant area of savings potential and the 30 percent challenge makes little sense in this context. The opportunity to look at numbers of service personnel may be a highly emotive and political point in itself but is worth considering.

He also pointed to the importance of harnessing technology and artificial intelligence to boost the department’s efficiency.

The advancement in autonomous vehicles, of drones and in computing of AI, machine learning and robotics will surely combine to produce a defence capability that puts fewer people in harm’s way and presents a very different offensive and defensive posture, at a much lower overall cost.

An MoD spokesman told The Times that it had made “good progress towards our target of £7bn of savings by 2021”.

Verdict deals analysis methodology

This analysis considers only announced and completed artificial intelligence deals from the GlobalData financial deals database and excludes all terminated and rumoured deals. Country and industry are defined according to the headquarters and dominant industry of the target firm. The term ‘acquisition’ refers to both completed deals and those in the bidding stage.

GlobalData tracks real-time data concerning all merger and acquisition, private equity/venture capital and asset transaction activity around the world from thousands of company websites and other reliable sources.

More in-depth reports and analysis on all reported deals are available for subscribers to GlobalData’s deals database.

Topics in this article: ,