Britannia Shield: the £10 billion question for British jobs

Finito World

There are two ways of looking at Kemi Badenoch’s proposed £10 billion Britannia Shield.

The first is to ask whether it would work. The second is to ask what it would do.

The distinction matters. The Conservatives’ proposed missile and drone defence system has inevitably been discussed in military terms: radar coverage, interceptor missiles, command-and-control systems, drones and the ability to protect critical national infrastructure. It is intended to cost £1 billion a year over ten years, with a minimum deployable capability envisaged within five.

But viewed from the employment market, something else comes into focus. This would also be a very large industrial programme.

And large industrial programmes create ecosystems. A functioning Britannia Shield would require radar engineers, software developers, systems engineers, cyber-security specialists, missile technicians, physicists, electronics engineers and experts in artificial intelligence. Around these would sit manufacturing jobs, maintenance roles, construction, logistics, procurement and project management. Further out again would be the supply chains: components, semiconductors, specialist materials, communications equipment and hundreds of smaller companies whose names would never appear on the side of a missile.

These are not theoretical categories of employment. Skills England estimates that 14 priority occupations in defence alone will require around 82,000 recruits between 2025 and 2035 when expansion and replacement demand are combined. Most of the additional employment is expected to require qualifications at Level 4 or above.

This is therefore potentially good news for a country which has spent a great deal of time worrying about the disappearance of skilled work Britain is already unusually good at many of the things Britannia Shield would require. The aerospace, defence, security and space industries support 468,500 direct jobs, according to ADS, and contain some 29,000 apprentices. The question for any government embarking on a programme of this kind should be how much of the £10 billion can remain in Britain.

That means procurement matters almost as much as expenditure. There is a world of difference between a £10 billion defence programme which purchases technology principally from overseas and one which deliberately develops British intellectual property, manufacturing capacity and skills. If Britannia Shield is to become an industrial policy as well as a defence policy, ministers would need to think about apprenticeships in Barrow, Bristol and Belfast; engineering graduates; British SMEs entering defence supply chains; university research; retraining programmes; and the ability of a teenager presently wondering what to do after GCSEs to see a route into the sector.

Defence expenditure can, in other words, be employment policy. But this is where Badenoch’s announcement becomes more interesting, because the Conservatives are not proposing to find this money in isolation.

They have tied their increased defence ambitions to reductions in welfare expenditure. The party has cited measures including reinstating the two-child benefit cap and reforming housing benefit as part of the means by which higher defence spending would be funded.

This creates a rather unusual economic circle. Money presently spent partly on supporting people outside work would be redirected towards an industry which desperately needs workers.

There is an argument behind this which is recognisably Badenochian: government should spend less maintaining economic inactivity and more creating the conditions for productive employment. If welfare reform succeeds in moving people capable of working into sustainable employment, while defence expenditure creates additional jobs, the two policies could theoretically reinforce one another.

But that word “if” is doing considerable work. A radar engineer cannot be produced simply by reducing somebody’s housing benefit. Nor does cutting a benefit create a job for the person who loses it. Between welfare and work lies the difficult terrain which governments of all colours repeatedly underestimate: health, childcare, transport, confidence, qualifications, retraining and the availability of appropriate jobs in appropriate places.

The employment test of welfare reform should therefore be brutally simple. Not how many people receive less money, but how many people subsequently find durable work. There is another complication. The Conservatives are simultaneously proposing to dismantle significant parts of Britain’s net-zero framework. Badenoch has made opposition to statutory net-zero targets a defining element of her economic prospectus, while the party has also proposed removing environmental regulations and institutions which it believes increase costs and inhibit development.

From an employment perspective, however, net zero is not merely an environmental policy. It is already an industry. CBI Economics and the Energy and Climate Intelligence Unit estimate that the UK net-zero economy supports around 1.1 million full-time-equivalent jobs across energy, manufacturing, construction, engineering and professional services. Their analysis puts its total gross value added at approximately £105 billion.

Those numbers do not mean every net-zero policy is economically sensible, nor that every subsidy should survive. Governments should be perfectly capable of distinguishing a viable industry from an inefficient regulation.

But they do mean that “scrapping net zero” cannot sensibly be discussed as though nothing happens to employment when you do so.

Some of the skills involved are remarkably close to those required by defence: advanced engineering, electronics, materials science, software, complex manufacturing and infrastructure construction. Britain is therefore contemplating two enormous technological transformations at once — one driven by deteriorating global security and another by the changing energy system.

The intelligent question is not necessarily which one we choose. It is how much of both we can build here. There is an enticing industrial possibility in Badenoch’s announcement. Britain has spent several decades becoming exceptionally good at inventing things and rather less good at manufacturing them at scale. Defence may now force us to relearn the latter skill.

The war in Ukraine has demonstrated that modern warfare is partly a contest of manufacturing capacity. A brilliant prototype is of limited use if an adversary can produce the cheaper weapon in vastly greater numbers. Drones, counter-drone technology, sensors, interceptors and electronic warfare all point towards a future in which national security and industrial capacity become increasingly difficult to separate.

That should make Britannia Shield interesting even to people who never wish to see it used.

If £10 billion helps recreate British manufacturing capacity, develops exportable technology, produces apprenticeships and gives thousands of young people a route into engineering, its economic significance may reach considerably beyond defence.

But the reverse is also true. If Britain cuts one emerging industrial sector, reduces welfare payments and then spends the proceeds purchasing expensive defence equipment manufactured elsewhere, we will have achieved a curious feat: considerable political disruption without much employment benefit. So there should be a jobs test attached to Britannia Shield from the beginning.

How much will be manufactured in Britain? How many apprenticeships will result? How many SMEs will enter the supply chain? Which skills shortages need addressing now? How many jobs will exist outside London? And, crucially, what proportion of the intellectual property generated by the programme will remain here? These questions may sound secondary beside the prospect of missiles falling on British soil. They are not.

A nation’s ability to defend itself ultimately rests on the depth of its skills, its productive capacity and the resilience of its economy. The people who design the radar, write the software, manufacture the components and maintain the system are as much a part of Britannia Shield as the interceptors themselves. The £10 billion announcement therefore raises a larger question about Badenoch’s Conservatism.

It appears to envisage a state which spends less on welfare and environmental regulation but more on defence, infrastructure and productive capacity. Whether one agrees with that settlement or not, it represents a significant proposed transfer of resources — and therefore of employment — from one part of the economy to another.

The real measure of it will not be the rhetoric surrounding either welfare or net zero. It will be whether Britain ends up with more people doing useful, skilled and well-paid work. For a country with a weak labour market and persistent skills shortages, that is the employment question which matters most.