You've seen a lot of positive sentiment over the last months. Clearly the backdrop to that is conflict globally, whether that's in the Middle East or in Europe for the first time in decades of course, So I think society has seen a need to respond to some of these threats and therefore governments are very attuned to that. We've seen a lot of transformation coming through defense in the UK in particular, so you're seeing the structures of defense in government transforming.
Now.
They want more pace, they want more agility, the flow of funding has to be improved, and also recognizing that post COVID, where we recognize that supply chain resilience was a key attribute, we need that in defense as well. So I think the ambitions you've seen from the UK government with announcements on significant increases of defense spending are really positive, but that needs to translate in terms of reality on the ground.
How much does the rest FIC then match the money that's actually being committed.
In your view, I think it will flow, but it takes time, as always, because some of those systemic changes that I referenced are only starting to now come through the system. And I think maybe the incoming labor administration was a little bit surprised at what it found when it came in. It will be then for them to talk about that. But we've needed to increase defense spending for some time. I would say the threat vector is increased,
so that's driven that need to change. So now increasing to two point five potentially three percent in the next parliament absolutely critical. And I think what's lost sometimes is the UK does sustain a nuclear deterrent Many of our peers don't do that, so that takes a significant amount of defense budget. So when you're looking to recapitalize other programs, you've got to be cognizant of a lot of expenditure on that nuclear deterrent program.
Leonardo obviously is involved in it in a number of important projects, I mean, including things like GCAP, which is the Global Combat Air Program, a joint venture with a whole host of other countries and companies. You know, that is a long term project. We're thinking sort of twenty thirty five for that. In terms of the here and now, can you talk to the size and scope of expected orders from Leonardo UK from the UK government. When do you think those orders are going to come?
So gcap's a live program now, so we're actively supporting the creation of the systems, the processes, the capabilities, and I think from a Leonardo perspective, we're really pleased because we're the industry lead from an Italian perspective, alongside BA Systems and our Japanese partners. But in the UK we're driving what's called i SANK, the Integrated Sensors in Non Kinetic Effects Element, which is very high skilled jobs across the length and breadth of the UK in Edinburgh and Luton,
so on and so forth. So there's funding already flowing through for that program, and over the next period of time we'll be setting up the headquarters in the UK as well, in bringing together engineers from Japan, Italy and in the UK to collaborate there. UK government programs that are live today are many. We're doing some work with them on the new medium helicopter program at the moment.
That will be a key one for our helicopter division business down in the Southwest, and I think very recently we announced that we just responded to the final kind of position of the RFI and our best and final offer had gone in so hopefully that program will continue
to progress in line with the mod's stated requirements. But of course across the spectrum, whether it's support to Typhoon, or whether it's gcap or it's maintaining the existing rotary fleet we have in the Southwest, or even the work we do in the Cyber Division, all of those programs
are continuing. And of course as we see more activity, particularly support with the typhoon fleet for example, of our partners in other organizations, you're seeing an uptick in requirements and spare in having that capability back in the UK to support them absolutely critical and that's why I'm really pleased at some of that investments flowing through in terms of jobs and skills. So we're going to take another
one thousand employees this year alone. Many of those are very high skilled jobs, which is what the government wants in terms of that growth agenda.
But is that any different than what you might have taken on in terms of workers and young engineers, young young employees.
I would say it's higher because we look to replace turnover of course, and because of the sector we're in, you have to have security clearance, so that does restrict the type of demographic we can go for. Sometimes but given that flow through of work in GCAP in particular, on top of the continue to support for Typhoon, and I would say thanks to the UK government for the export support as well, because we're seeing a lot of
interest in international partners around the typhoon program. That's driving requirements, so that means that we've got to get the skills on board as quickly as possible. And in the regions that we operate in, that's really important because a number of our sites are located in areas which have challenging social issues, so that investment that we can put into that local community really does have a catalytical, catalytic effect on what goes on there.
Okay, perhaps I'll come back to that. Is there some frustration though with whether the rhetoric is going to match the money and the action currently and the government is talking about much more speed and yet Europe is talking
about huge sums to be invested in European defense spending. Yes, they're coming from further back maybe nationally, but actually is there some level of frustration that actually things are not The rhetoric is there, but the orders and the investment is still a long way off.
I think what will be interesting is we're awaiting a number of significant reviews. So we know the Strategic Defense Review is coming, We've got the Comprehensive Spending Review coming, We've got the Industrial Strategy Defense industrial strategies. So I think my plea would be, let's get those through quickly. There are bound to be some tough decisions for government in terms of spending priorities, whether that be CSR, Comprehensive
Spending Review, or defense itself. The ambitions there, but of course the current funding twenty twenty seven is still a few years away. The challenge will be to maintain and ensure that we've got those capabilities that we need and we're looking to the future quickly. People will talk a lot about autonomy and autonomous capabilities coming through. Well, those types of technologies need developing, they need funding. We need
to look at the R and D coming through. So Leonardo alone last year invested over five hundred million in R and D for example. That's the type of partnership and government that Defense can deliver now through the primes supporting SME. So how can we ensure that that funding flow comes through. You mentioned Europe, and I think it's really interesting because from a Leonardo perspective, we're seeing a lot of collaboration now across the European domain and also
slightly outside with Baker in Turkey as well. But recapitalization of land capabilities for sure, huge partnerships coming with Ryman Tallin in Leonardo around land vehicles. But we're seeing states like the German's invest significant amounts in defense and that money starting to flow through. I would say, probably quicker than we would have expected, but it's now starting to happen.
The government is insistent on its agenda for economic growth, and almost everything that it does is seen through that lens, including defense. Is it really possible to see it that way or does the priority simply have to be on rebuilding the military and defense capabilities and supply chains. You know, if you've see everything through a lens of building local jobs, that can you can't ride two horses at the same time.
I think it's always as a balance, for sure. I think historically the approach to defense acquisition has been on a kind of lowest cost approach, what's going to be the least expensive to the taxpayer. I think that approach has its merits, but then just takes away from the social impact you can have through good defense jobs, and we see it across the UK. Now where you've got a anchor defense industry, you do see wealth generation, you
see that interaction with local communities. So we will undoubtedly have to look at capabilities that don't exist on shoring work with partners internationally, but I think we do have to start prioritizing who are those national champions almost in particular capability areas, what are the strategic assets we want to maintain in the UK And through existing mechanisms we have the single Source regulations for example, some great work from the team they're working with SMBs, working with Primes
to ensure that we're flowing defense spending down into supply chains, keeping that resilient. So there's a balance. But I think this week as we testify, if you if the government invests one pound in Leonardo, you get a two pounds forty return, that's Oxford Economics data. So what that then gives you the ability to export as well, because in the UK you generate intellectual property, which means that you can then export that to international partners.