UK defence industry warns of risks from cutbacks

Tue Sep 1, 2009 2:38pm BST

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* Defence industry calls for government support

* Comments come ahead of election, planned defence review

By Rhys Jones

LONDON, Sept 1 (Reuters) - Budget cuts could damage Britain's armed forces and investing in the defence industry could help lead Britain out of recession, leading figures from the UK's armaments sector said on Tuesday.

"The defence industry requires support and leadership from political leaders and we are looking for future governments to take that forward," Ian King, chief executive of BAE Systems (BAES.L), told reporters. "Unless it is adequately funded it will cause problems for Ministry of Defence (MoD) forces."

His comments came as trade body the Defence Industries Council (DIC) published reports on the economic contribution the defence industry makes to the UK and the support it gives to the UK's armed forces.

The DIC remarks were seen as a warning shot to political parties not to cut an annual defence budget of around 36 billion pounds ($58.8 billion).

Spending will come under the microscope next year when Britain conducts its first strategic defence review in more than a decade. The review is expected to be held early in the next parliament.

A general election is due by June 2010 and the issue of how to cut a record budget deficit will be one of the central themes.

Britain has some 9,000 troops in Afghanistan and critics say a lack of helicopters makes them particularly vulnerable to roadside bombs. Two hundred and ten British service personnel have been killed in Afghanistan since 2001. Britain's defence industry, which gets around 75 percent of its revenue from the MoD, needs more investment, not less, according to DIC Chairman Mike Turner.

"There are huge economic benefits created by the wealth the industry generates. I'd like to see 2 billion pounds extra for the Defence Industrial Strategy (DIS)," said Turner.

The DIC said the industry, which employs 300,000 in Britain, generated an annual turnover of 35 billion pounds last year.

"The defence sector can help lead us out of recession," said Martin Fausset, managing director of Rolls-Royce Group Plc's (RR.L) defence and aerospace business.

"We are creating and sustaining jobs and building the UK skill base. For every 100 million pounds invested, the industry produces 227 million pounds in output for the UK." (Editing by David Holmes) ($1=.6126 Pound)

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