Brexit and the defence industry

 

The total cost of sales of weapons and military equipment carried out in the EU significantly exceeds € 100 billion, which allows Europe to be considered the second largest exporter of weapons after the United States.

 

In general, before Brexit, the EU defense industry employed more than half a million workers directly, and more than a million jobs were indirect. Despite these impressive numbers, the arms companies of the continent never combined into one joint venture, but always worked as separate units in completely different markets.

 

Decision makers in Brussels saw the need for closer integration in the arms market a few years ago.

 

The European Defense Agency, established in 2004, is responsible for both the multilateral cooperation of the armies of each member state and cooperation in the establishment of closer relations in the European defense sector, so that its negotiating positions are stronger and international. Thanks to sustainable financing, the military industry in the EU is now becoming more Europeanized.

 

An example of this is the Eurofighter Typhoon multirole fighter. From the very beginning, this aircraft was designed as a joint multidisciplinary project, which led to the creation of a new fighter for a number of European armies.

 

Due to this interoperability, funding came from various companies and even national governments, which then pledged to purchase a finished aircraft.

 

This process is likely to continue after Brexit, simply without the presence of British companies. The European Commission has made the integration of the European defense industry one of its main tasks.

 

Successful cooperation of the EU defense markets is “absolutely possible” without the UK, since most technologies and components can be obtained from alternative sources, the Warsaw Institute report emphasizes.

 

This is even though the total profit of the entire EU defense industry will be significantly reduced at the beginning of 2020. This will happen only because of one British company – BAE Systems. British Aerospace Engineering is the largest defense company in Europe, which sells arms for € 25 billion a year, and 85 thousand employees are engaged in its activities.

 

Although BAE Systems is not exclusively focused on defense (it also manufactures products for the civilian market), it is still considered to be a predominantly weapon-oriented company. The third largest company in the arms market of Europe is the French company Thales, which earns € 7 billion. Now that the UK is outside the union, this profit will flow outside the EU and will not contribute to closer integration of the union’s defense market.

 

At the same time, it is important to emphasize that a divorce does not have to completely complete all the international defense projects of many companies, although they will not be as simple as before.

 

The free trade agreement, which the UK and the EU wish to sign in the near future, will both simplify cooperation and reduce costs associated with customs duties and taxes.

 

This will only be possible if Brussels and London come to an agreement before December 31, 2020, negotiations on which, according to sources, are slow and painful, which calls into question the achievement of consensus before the end of the transition period.

 

If a free trade agreement is not possible, then bilateral industrial cooperation agreements are needed to reduce Brexit’s impact on the defense industry. These documents, signed by the UK with individual EU countries, will reduce or even completely abolish customs duties, taxes and border checks, which will simplify cooperation and the exchange of goods and technologies.

 

At the same time, it must be remembered that such documents are usually prepared for long months, if not years, and the need for coordination and ratification by all 27 EU member states can be a difficult task for the current and future administrations of Great Britain.

 

Fearing the exclusion of British finances and technological know-how from the planned pan-European defense programs – such as the tank and the fighter of the future – German officials have already expressed a desire to grant London a special status that will allow it to join any new or old joint programs. This would allow both Brussels and Westminster officials to avoid the lengthy process of bilateral free trade agreements.

 

The need for a special status in the defense relations of Great Britain and the EU also becomes apparent when looking at the second largest defense company in Europe – Airbus. Its defense division, Airbus Defense, produces arms worth € 13 billion a year, and 140,000 employees work in several countries of the union.