Defence firms have complained to the Bank of England that business is stalling, in the latest evidence that a hoped-for government spending boost has yet to materialise.
A survey conducted by the Bank’s network of agents said that ‘defence contacts report new orders are slow to progress’.
The comment – part of a wider report into business conditions across the UK economy – appears to confirm the exasperation of defence companies with the Labour Government.
Industry body ADS told the Daily Mail it was ‘a difficult period for industry’ as it endures an ‘idle phase’. While the Government has promised to ramp up defence spending to 2.5 per cent of gross domestic product (GDP), firms are yet to see any evidence of the increase.
Last month, a senior defence source told The Mail on Sunday that small businesses in the sector were at their most downbeat for two decades while even larger operators are ‘deeply frustrated’.
While some firms have been boosted by strong export orders, others more reliant on demand from the Ministry of Defence (MoD) are struggling as orders fail to materialise.
High-flyer: An RAF Eurofighter Typhoon ascends, but government spending in the defence sector has still not taken off
There has been alarm over reports of a £28billion hole in the Government’s spending plans.
And there is also concern about a delay in Labour’s investment strategy – fleshing out its commitment to raise the defence budget. Many had hoped for the plan to be released by the end of last year, but some think it will now happen next month.
It represents an alarming gap between rhetoric about defence and the reality experienced by firms. Some fear spending could be ‘cut to the bone’, with key programmes axed.
Samira Braund, defence director at ADS, said: ‘It is a difficult period for industry and as we continue through this idle phase, it is hard to see how the situation will improve in the near future.
‘While we recognise the current fiscal environment is challenging and appreciate the difficult choices that must be made, the Government must carefully consider what is at stake.
‘The pockets of growth emerging in the defence sector are reassuring, albeit largely driven by exports, but it is essential that this demand is also reflected here in the UK.’
The MoD has previously said, in response to the complaints, that it has signed more than 1,000 major defence contracts since the election and that it will raise spending on smaller businesses by £2.5billion by 2028.
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