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Government Gives Arms Industry Extra Tens of Millions of Pounds During COVID-19 Pandemic

Joshua Stein reveals how defence contractors are booming while the rest of the British economy suffers from the impact of the Coronavirus crisis

The fourth Astute-class nuclear-powered submarine, HMS Audacious, outside its indoor ship building complex at BAE Systems in 2017. Photo: Owen Humphreys/PA Archive/PA Images

Government Gives Arms Industry Extra Tens of Millions of Pounds During COVID-19 Pandemic

Joshua Stein reveals how defence contractors are booming while the rest of the British economy suffers from the impact of the Coronavirus crisis

The Ministry of Defence has forked out hundreds of millions of pounds to its favoured clients in 2020, in the face of the economic ruin caused by the COVID-19 pandemic. 

A Byline Times investigation has revealed multi-million-pound contracts signed by the MoD surged by more than £30 million between April and July 2020, despite the economic toll of the Coronavirus pandemic.

In comparison to 2019, the ministry’s 10 top contractors – headed by BAE Systems and Babcock International – took in an extra £32 million worth of profits from contracts with the MoD.

The MoD paid the 10 companies a total of £712.4 million for contract work in just four months, in comparison to £679.6 million in the same period the previous year. Statistics firm Statista revealed that these 10 companies were the MoD’s “leading suppliers” in 2018-2019.

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While contract data is vague, some of the expenditure has been traced back to the industry giants.

BAE Systems, which was the highest paid MoD contractor in 2018/2019, received £200 million worth of funding towards its dreadnought submarine work in the six months leading up to June 2020. Much of that period was spent under lockdown, which began in England on 23 March. The documents do not disclose when exactly the £200 million was spent on the submarine fleet.

The dreadnought submarines, expected to cost £7.2 billion by the end of production, will replace the Royal Vanguard class of submarines, which carry the UK’s nuclear deterrent. 

Overall, BAE took £353.9 million of the MoD’s money between April and July, an increase of more than £45 million on the same period in 2019. The British security and defence firm – which refers to the MoD as its “main customer” in its most recent half year report – has been criticised repeatedly for exploiting the much-publicised ‘revolving door’ of government positions and the arms industry.

£569 million was spent on ventilators during the pandemic – in comparison to the £712 million spent on defence contracts with these 10 companies alone.

BAE’s chief lobbyist, Oliver Waghorn, previously worked as a special advisor to Conservative MP Liam Fox while he was Defence Secretary. Under Prime Minister Theresa May, Fox was then made International Trade Secretary, which involves managing trade regulations with other countries.

BAE continues to secure large contracts with countries including Saudi Arabia, which has been accused of human rights abuses in its proxy war in Yemen.

In August, the Campaign Against the Arms Trade (CAAT) said that “a disturbing number of senior government officials, military staff and ministers have passed through the ‘revolving door’ to join arms and security companies”.

“This process has helped create the current cosy relationship between the Government and the arms trade – with politicians and civil servants often acting in the interests of companies, not the interests of the public,” the CAAT report continued.

In total, BAE made £559 million worth of profit in the six months leading up to June 2020, according to its half year report.

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The scale of the UK’s arms exports, from 2015 to 2020. The two countries which received the most exports were Saudi Arabia (£5.4 billion) and the USA (£2.8 billion). Data from the Campaign Against the Arms Trade

Campaigners have called for the nuclear deterrent, also known as Trident, to be scrapped for moral and economic reasons, with the Scottish First Minister Nicola Sturgeon saying last year that she has “a moral objection to weapons of mass destruction”.

Byline Times’ investigation further suggests that the defence industry is a top priority for the Government. During the COVID-19 pandemic, the expenditure on these 10 firms dwarfed the Government’s expenditure on ventilators as the virus peaked.

According to a National Audit Office report published in September, £569 million was spent on ventilators during the pandemic – in comparison to the £712 million spent on defence contracts with these 10 companies alone.

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Andrew Smith, a spokesperson for CAAT, which monitors and campaigns against the UK’s arms industry, said that the revelations “expose the warped priorities of Government”. 

“The COVID crisis has been mishandled from the start, yet Government has continued to spend huge sums on extravagant military projects that do nothing to protect us from real threats like financial instability and pandemics,” he told Byline Times.

“Once the crisis is over, there must be a full evaluation of UK security policy. It cannot be right that billions of pounds are being spent on aircraft carriers and weaponry, when nurses and doctors have struggled to get protective equipment. Our security is strengthened by building a fairer and more equitable society, and by investing in public services, not by lining the pockets of arms dealers.”

Key Workers

Questions should be asked about why the Government worked to keep money flowing into the arms industry at the height of the pandemic, despite the economic shock of the virus leading to businesses around the UK suffering, and some closing.

Annual statements by contractor Babcock – the second-highest earner from the MoD in 2018-2019 – reveal that its work in the defence industry was “declared to be critical and our people designated as key workers” during the pandemic. In a statement, the company’s chief executive, Archie Bethel, said that “all of our major sites remained open”.

Key workers during the pandemic included doctors, nurses, teachers and policemen, and other workers who provide an essential service to the UK. Babcock’s contracts with the MoD include a substantial £1.25 billion agreement signed last November to produce five frigate ships for the Royal Navy. The contract will come to an end in 2028.

A MoD spokesperson told Byline Times: “Following Government guidelines, contractors critical to the delivery of key defence and national security outputs were classed as critical workers. Defence Secretary Ben Wallace has praised the MoD’s partnership with Britain’s defence industry, which maintained its critical output during the Coronavirus pandemic.”

Babcock’s chief executive Bethel also thanked the Government in his company’s yearly report, saying he was “also extremely grateful to HM Government and in particular the Cabinet Office and Ministry of Defence who acted quickly and decisively to ensure that contracts continue to be funded and that cash flowed effectively through the main suppliers and down into the supply chain”.

At the same time, a report by business recovery specialist Begbies Traynor revealed that half a million British companies were in financial distress owing to the impact of COVID-19 back in April. That figure is likely to be much higher now.

“Defence is incredibly well placed to support the Government’s building agenda, with our investment securing first-class equipment and more than 300,000 direct and indirect jobs,” the MoD spokesperson said. “It is only right that we continue to invest in and drive forward key defence programmes.”

A spokesperson for BAE Systems said: “We spend £3.7 billion each year with around 6,000 UK suppliers and, working with our customers, we’ve maintained the cashflow to our business and into our supply chain throughout the pandemic. We’re also providing additional assistance and financial support where needed, so that together we can continue to deliver critical defence and security capabilities to our customers.”

Babcock International refused to comment.

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