Submitted by James White on 29-09-2010

“We just don’t make anything anymore” came the anguished cry as the UK’s over-reliance on the financial services industry was laid bare at the height of the banking crisis.

The demise of established industries such as shipbuilding over the last 30 years lends some credence to this argument. That said, the UK can still lay claim to being a genuine force in aerospace and defence - an industry that last year generated £22.2 billion of revenues and has consistently generated over £5 billion in exports annually over the last decade.

And yet, as the industry awaits the findings of the Strategic Defence and Security Review, the mood within the industry is far from upbeat. Cuts loom large on the horizon.

However, despite this backdrop of uncertainty there are still distinct “sweetspots” of spending that look likely to avoid the worst of any cutbacks.

Battlespace IT, through which different forces interface on the battlefield, is one. Even if programmes like the Joint Strike Fighter jet are scaled back, the need to retrofit sophisticated electronics on to existing jets to satisfy the needs of an increasingly digitised battlefield will continue to drive demand.

Likewise, cybersecurity is “a good place to be”. Digital communications and the internet are now a vital element of a country’s infrastructure and, as the emergence of the Stuxnet virus shows, failure to employ secure cyber defences could have alarming consequences.

UK companies like Ultra Electronics, Chemring, and Cohort (all MHP clients as it happens) have positioned themselves well within these sectors and are now poised to reap the benefits.

Furthermore, given the expected decline in UK defence spending, companies have diversified away from the MoD, tapping in to the lucrative US Department of Defence and expanding into emerging markets in the Middle East and India.

So, whilst the noise from the welders and the rivet guns at UK dockyards may have dimmed, the hum of activity in the aerospace and defence sector has steadily increased – food for thought the next time you read the UK doesn’t make anything…