Clive Higgins (2:33)

I think it's worth just understanding the phasing of activities that this government set out as they came into power, which was very much prevised around a complete reset, defence transformation, defence reform, but also then setting out that strategic ambition. So we've seen the Strategic Defence Review and of course we had the Comprehensive Spending Review, which was trying to align the fiscal challenges with that need to invest more in defence, which hasn't really seen much investment over many decades in the uk. Very early on this week we had the Defence Industrial strategy, which was on the back of the other eight sector strategies. The key ones for this government, looking at advanced manufacturing, looking at the financial sector. And now we're moving towards the Defence Investment plan, which we're led to understand will come later this month, which will then set out that funding strategy for all of those key programs going forward. So as always, the in year challenges are key though. There's, I think an overheated program overall and some tough decisions will need to be made by the officials and government around what capabilities. But the demand signal is clear and also the stated intent is clear. So increases by 2027 and then 3% in the next Parliament. But the reality is, if you want to keep the resilience in the supply chain, we need to see some of that coming through now. So we need to see money flowing through the system, into the primes, into the SMEs to allow us to employ those people, keep that supply chain going and ensure that we're delivering against those requirements that are evidently needed. From our opening part of the conversation around those increased tensions, and I'm sure.

Interviewer / Co-host (4:06)

That'S a conversation you've been having with government as well. How are they responding to that? Because it's a very clear demand from the industry.

Clive Higgins (4:13)

Absolutely. And you've seen a reshuffle in the UK government over the weekend. There's been some small changes in the defence team. All of them are very well versed on the requirements to get those contracts coming through and allow industries like ours or businesses like ours to take that long term strategic view around investment in jobs, skills, capability, all the things that are needed and they're very aware of the need to do that at pace.

Interviewer / Journalist (4:41)

How many more jobs do you think that are going to be created here in the UK for Leonardo UK, let's say over the next 12 months versus five years? Because that's the issue, isn't it? It's about speed. I mean, we had the 10 billion pound deal between the UK and Norway for shipbuilding, 26 frigates which has gone to B AE Systems. I mean that could see a significant revival in terms of industrial capacity, shipbuilding capacity in particular in Britain.

Clive Higgins (5:05)

Yeah, I think two elements to that. Clearly absolutely fantastic news around the frigate contract with Norway. There's another element to come on the back of those frigates. They will need some anti submarine warfare capability. Leonardo provides a very good rotary wing platform in the Merlin, the AW101, which can actually fulfill that requirement and we already deliver search and rescue capability into Norway. So we need to work in lockstep with government to ensure that we deliver more in that export agenda, because that is one element of delivering those sovereign capabilities for the uk, as we mentioned at the start, partnership with, whether that be Norway or Poland or other countries such as Italy, absolutely critical. And we're seeing that on the Global Combat Air program as well. In terms of our trajectory of needing to hire new staff, we've got 900 graduates and apprentices on our programs today, significant number, 10% of our working population. And as we see that investment in programs such as the Global Combat Air program, that is driving requirements of 400, 500 new heads per annum, now we have to offset that by, in our other areas of the business, in our cybersecurity business, in our rotary business, actually we need that demand signal of contracts coming through. So whilst one line of business, one division is doing well, that sometimes is offset by some challenges and uncertainty in the contract flow from other areas. So I do see growth in some areas, but I'm cautious in others.

Interviewer / Journalist (6:27)

The last time that we spoke a few months ago, which does sort of feel like a long time, as we see the buildup in military tensions globally really kind of ramp up, you were concerned about being able to get the right sorts of skills in the UK and also being able to speak to those apprentices and those young people that actually there was a real reluctance to engage with the defence sector. Has there been a real shift in that? You know, actually talking to schools and universities about getting that skill, has that changed?

Clive Higgins (7:02)

So I think two elements, we really do welcome the additional funding that's coming through in terms of defence cities and technical places. We've also got destination defence, which is a ambitious program sponsored by our ADSR sector council and institutional partners around attracting people into defence. I think the reality on the ground is universities and academia are still challenged by that volume of anti defence sentiment that's out there. And if you're got any time today to come across to the defence security equipment show, you'll see a significant protest outside supporting Palestine Action Group and those things. And I don't have a problem with that kind of peaceful protest. People have the right to do that, but of course that's part of the system now. And if more and more youngsters and people don't want to take up opportunities in defence, that's really going to impact our resilience. And we do need to see more action on some of that ESG agenda, which has stopped some SMEs, accessing bank accounts, accessing finance, to ensure that we recognise defence as a force for good in society and protecting the values that we all hold dear.

Interviewer / Co-host (8:12)

When does issues around that talent and training pipeline actually affect, have a concrete effect on your ability to expand?

Clive Higgins (8:20)

Well, it absolutely does, because if we can attract the skills, the capability, the talent into the business at the time we do it, that delays programs, it's as simple as that. There's a correlation between having enough of the right skills to deliver the outputs we need.

Interviewer / Journalist (8:34)

In terms of what is different for Leonardo UK now versus January, the beginning of the year, how much more business are you getting from the British government in terms of concrete orders now? What has actually changed?

Clive Higgins (8:50)

So we're seeing a pipeline, we're seeing the demand signal. We've now got to work on the execution of those requirements into actual contracts. I would say if you come into the export market market and over 50% of our UK revenues is now export, so we're 2.6, 2.7 billion revenue in the UK, we are seeing clarity of that demand signal contracts flowing through from the US and from European partners as well. And this plays to that point around Europe, the SAFE Fund coming forward, the 800 billion that's talked about, we absolutely need to be at the center of that. And that's where I do welcome the Government's work. Earlier in the year, in May, when we did the European reset, we've now got to do the detail behind that, which the government's working on to ensure that UK companies, and that's Leonardo, back into Europe as well, from the UK position, as well as our headquarters in Rome, can partner with those European companies. The Polish arrangements can be really critical going forward to ensure that we're delivering our capabilities into export. So for me, the two come in lockstep.

Interviewer / Journalist (9:49)

There's concern about.

Interviewer / Co-host (9:50)

Oh, sorry, I'm just wondering, on the SAFE programme, what sort of potential do you see for funding from there?

Clive Higgins (9:56)

I think most of the funding is $650 billion is going to come from nation states. There's 150 billion within the EU instit institutions itself. So that's about having a bilateral with a particular nation and then working together on whichever capability. So it might be air missile defense, it could be more frigate programs, it could be land systems. So I think what we do with the Joint Expeditionary Force, with countries such as Norway and Scandinavia, what we're doing with Poland on missile and air defence and frigates, all very important.

Interviewer / Journalist (10:27)

A last thought on waste there. It has been real concern about the processes in the Ministry of Defence in the uk and that a rush to large orders will create more waste than we have seen in the past. What's your view? What's your response on the industry side of that?

Clive Higgins (10:45)

I think two elements we've seen through defence reform. A significant change coming through the system. The National Armaments Directors Organisation is being set up which is going to look at improving the procurement cycle for kind of very tactical activities. Off the shelf three months, moving to more complex programme, reducing the time from sometimes five, six years down to one year. That level of ambition is welcomed by everyone and it's starting to now manifest itself with the changes that are coming through. I then think what you're seeing in Europe is a better approach to partnership and consolidation across the defence sector. And the UK doesn't have much overlap itself, but it now needs to start putting those programs forward and placing those contracts.

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