What does geopolitical strategic uncertainty mean for industry?
Strategic uncertainty: The disparity between what is known, and what needs to be known to make a responsible decision.
Across The D Group’s Programme this year, it has become clear that industry is grappling with increasing strategic uncertainty. Our conversations have highlighted a number of concerns in key sectors and have pointed the way, if not to specific solutions, certainly to the kind of collaborative approaches required across complex ecosystems.
Conflict in the Middle East and in Ukraine has brought back a form of great power competition, requiring a revision in defence strategic concepts and necessitating a new relationship with the Government, military and the defence industrial base. In energy, the urgency of net zero coupled with the need for resilience and affordability means we must find a way to transition to a mix that can deliver all three. Space, which is essential in realising our national ambitions in all these domains, is also facing uncertainty in the way debris is dealt with, which could limit its capability to help solve these challenges.
Defence
The Armed Forces are in need of greater agility, human capital and mass/attritable capability. This will require an evolution in its relationship with industry
It is no secret we are now in a rapidly evolving geopolitical context, quite distinct from that of the 2010s. Whether this is seen as a new Cold War, a shift towards multipolarity or the return of great power conflict, the relationship between the Armed Forces, government and the defence industrial base must evolve if we are to ensure the nation’s security and protect our economic interests.
As set out in the Government’s key strategic documents, (Defence Command Paper, Integrated Review and Refresh, DSIS, Land Industrial Strategy etc), the changing threat landscape will place changing and increasing demands on the UK’s defence ecosystem.
Clarity and consistency on the client side
The need for clarity from Government as a buyer has been one of the primary themes expressed in our programme, particularly in defence. It is often unclear as to where a new company with promising technology should go to find application or support for their product, meaning that promising or otherwise viable new technologies can ‘wither on the vine’. It is thus welcome to see an intention to build a ‘Defence Space front door process.’
The defence industrial base will need to be both more agile and more resilient
We often hear from industry that Government could be a more effective partner, providing greater clarity and consistency in what it wants from industry. However, industry must also consider how it will meet the agility and resiliency challenge from Government. In the immediate post-Cold War context procuring primarily for cost has been the top priority, driving the shift towards single sourcing to leverage economies of scale. As we have shifted towards a more volatile and fractious geopolitical order, shorter, heterogenous and more responsive supply chains have moved up the priority order. In particular, large established defence companies will need to look more to smaller and agile young companies as partners to ensure new that capabilities can be developed and fielded faster. With hostile actors such as Iran rapidly deploying new drone capabilities, having a responsive and agile defence industrial base is now of paramount importance.
Infrastructure and energy
As the UK seeks to balance decarbonisation and transition to Net Zero with energy security, there are significant uncertainties to overcome in both energy and infrastructure policy. For example, previous “dunkelflautes” (days in which there is not sufficient light or wind to rely on our renewable energy sources) have been managed by using non-renewable generation and energy imports. With energy supply chains jeopardised by regional conflict and given the intention to phase out domestic non-renewable energy generation, there is a need for a creative new approach.
What should the UK’s energy mix be?
There is a strong desire from industry for a national energy strategy that sets out in clear practical terms how the UK will reach its goals of greater energy resilience and net zero. There is great potential in green and blue hydrogen projects, in modular SMRs and in wind and solar. However, there must be greater collaboration across industry, including on the realistic sequencing of the rollout of new non-fossil fuel sources of energy. This means avoiding a zero-sum approach to competing technologies and energy sources. This could be supported by greater clarity from Government on a national energy mix, setting out its preferred balance of renewable sources as well as the regulatory underpinnings required to deliver them within the established timeframes.
Space
The challenge of space debris must be addressed if the sector is to succeed
The space sector has seen a recent burst of activity after a period of relatively slow progress. However, there is significant uncertainty around the challenge of space debris. According to the ESA, about 2 trillion pieces of debris are 0.1mm in size and 128 million pieces of debris are of 1 mm in size.[1] Unless contributions to debris can be reduced and exiting debris removed, it is possible there will be a ‘hard ceiling’ on space launch, actually curtailing the potential for progress. This is not just critical for space exploration: constraints and added risk on launching satellites could jeopardise both national security and climate goals. The UK is taking a leading role in taking on this challenge by exploring the use of removal insurance bonds, on which we have an upcoming session. Sign up here.
Space regulation
The UK space sector is undergoing a period of regulatory change which could put it at a disadvantage relative to other nations. With regulatory clarity, the UK can leverage its advantages in insurance, building on the London market’s leading position and making the UK a world class destination for space insurance.
Politics
An impending General Election
The impending General Election creates uncertainty as to the future of the relationship between Government and business. The prospect of a Labour Government in particular brings with it uncertainty if only because it has not been the party of Government in nearly 15 years. Many relationships and working patterns are now beginning to be established from scratch.
Regardless of the outcome, the pace of events will force a change in the relationship between Government and the private sector over the coming period. While the Conservatives and Labour Party may have substantively different platforms in some areas, there are overarching geopolitical and environmental trends that are likely to shape the way Government and business interact. Whatever the domestic political context, Government and business will have to collaborate more intensively if the UK is to deliver on its national objectives and international obligations in a time of heavily constrained resources.
How is the D Group addressing these challenges?
Main Programme
We have sought to address growing uncertainty through our core Programme. The below events in particular might be of interest:
https://www.dgroup.co.uk/product/space-debris-the-final-frontier---removal-insurance-bonds
https://www.dgroup.co.uk/product/defence-reviews-past-present-and-future-2
https://www.dgroup.co.uk/product/the-bilateral-business-relationship-its-importance-and-future
Nick Forbes briefings
Strategy International’s Senior Advisor Nick Forbes is leading online sessions on preparing for the next General Election. He has covered social value in procurement and how Labour will approach resilience in dealing with omni-crises, write-ups available here and here.
Sign up for our next session, The Devolution Arms and Place Race here.
British Foreign policy Group analysis
With this year seeing 40% of the world's population eligible to vote, political uncertainty is far from a purely domestic challenge. Our sister organisation, BFPG have been covering major elections across the world, most recently India and South Korea.
