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Commissioned by the DDA, Northern Defence Industries, the Defence Manufacturers Association, Northwest Aerospace Alliances and Farnborough Aerospace Consortium, the report reviews the situation facing SMEs in the UK aerospace and defence sector. It suggests ways in which their talents, expertise and capabilities could be better harnessed in support of the aims of the Defence Industrial Strategy.

“By and large industry has welcomed the DIS with open arms,” (published last December by the Minister for Defence Procurement Lord Drayson) says Mercer Management Consulting’s director Bert Hunter, author of the report and a defence expert.

“But there is a little disappointment that although the DIS report recognises the importance of the SME community, in delivering the MOD’s goals of increased innovation, agility and affordability, few specific measures were outlined to support them.”

Despite the commercial aerospace market showing a recovery, SMEs have failed to benefit fully. Supply chain consolidation and strategic sourcing programmes during the last slow down, have reduced margins for many SMEs, or removed them completely from the market.

“The US Department of Defense has recognised the value of SMEs to future innovation and has a number of tools and approaches to encourage start-ups and to sustain existing companies. This is not about protectionism – this is about ensuring a healthy market place.”

The Mercer report suggests a national database of aerospace and defence SMEs and their capabilities is created alongside a scheme to evaluate and accredit SMEs. It also suggests the introduction of a UK office charged with the active management of diversity in the industrial base, and that the market place is rekindled by ensuring a percentage of defence spending is with UK SMEs. It needs to be made easier for the MOD to choose SMEs through a system of technical and financial guarantees being introduced that indemnify the MOD – similar to schemes already present in the rest of Europe. The final suggestion from the report is the creation of a fund to seed start ups where there is a strategic need and a gap in the UK supplier capacity. [Reproduced and edited by permission of the Defence Diversification Agency.]

www.dda.gov.uk