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Speaker 1: You've seen a lot of positive sentiment over the last months.

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Speaker 1: Clearly the backdrop to that is conflict globally, whether that's

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Speaker 1: in the Middle East or in Europe for the first

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Speaker 1: time in decades of course, So I think society has

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Speaker 1: seen a need to respond to some of these threats

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Speaker 1: and therefore governments are very attuned to that. We've seen

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Speaker 1: a lot of transformation coming through defense in the UK

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Speaker 1: in particular, so you're seeing the structures of defense in

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Speaker 1: government transforming.

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Speaker 2: Now.

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Speaker 1: They want more pace, they want more agility, the flow

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Speaker 1: of funding has to be improved, and also recognizing that

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Speaker 1: post COVID, where we recognize that supply chain resilience was

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Speaker 1: a key attribute, we need that in defense as well.

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Speaker 1: So I think the ambitions you've seen from the UK

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Speaker 1: government with announcements on significant increases of defense spending are

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Speaker 1: really positive, but that needs to translate in terms of

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Speaker 1: reality on the ground.

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Speaker 2: How much does the rest FIC then match the money

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Speaker 2: that's actually being committed.

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Speaker 1: In your view, I think it will flow, but it

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Speaker 1: takes time, as always, because some of those systemic changes

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Speaker 1: that I referenced are only starting to now come through

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Speaker 1: the system. And I think maybe the incoming labor administration

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Speaker 1: was a little bit surprised at what it found when

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Speaker 1: it came in. It will be then for them to

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Speaker 1: talk about that. But we've needed to increase defense spending

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Speaker 1: for some time. I would say the threat vector is increased,

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Speaker 1: so that's driven that need to change. So now increasing

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Speaker 1: to two point five potentially three percent in the next

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Speaker 1: parliament absolutely critical. And I think what's lost sometimes is

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Speaker 1: the UK does sustain a nuclear deterrent Many of our

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Speaker 1: peers don't do that, so that takes a significant amount

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Speaker 1: of defense budget. So when you're looking to recapitalize other programs,

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Speaker 1: you've got to be cognizant of a lot of expenditure

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Speaker 1: on that nuclear deterrent program.

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Speaker 2: Leonardo obviously is involved in it in a number of

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Speaker 2: important projects, I mean, including things like GCAP, which is

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Speaker 2: the Global Combat Air Program, a joint venture with a

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Speaker 2: whole host of other countries and companies. You know, that

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Speaker 2: is a long term project. We're thinking sort of twenty

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Speaker 2: thirty five for that. In terms of the here and now,

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Speaker 2: can you talk to the size and scope of expected

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Speaker 2: orders from Leonardo UK from the UK government. When do

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Speaker 2: you think those orders are going to come?

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Speaker 1: So gcap's a live program now, so we're actively supporting

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Speaker 1: the creation of the systems, the processes, the capabilities, and

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Speaker 1: I think from a Leonardo perspective, we're really pleased because

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Speaker 1: we're the industry lead from an Italian perspective, alongside BA

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Speaker 1: Systems and our Japanese partners. But in the UK we're

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Speaker 1: driving what's called i SANK, the Integrated Sensors in Non

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Speaker 1: Kinetic Effects Element, which is very high skilled jobs across

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Speaker 1: the length and breadth of the UK in Edinburgh and Luton,

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Speaker 1: so on and so forth. So there's funding already flowing

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Speaker 1: through for that program, and over the next period of

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Speaker 1: time we'll be setting up the headquarters in the UK

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Speaker 1: as well, in bringing together engineers from Japan, Italy and

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Speaker 1: in the UK to collaborate there. UK government programs that

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Speaker 1: are live today are many. We're doing some work with

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Speaker 1: them on the new medium helicopter program at the moment.

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Speaker 1: That will be a key one for our helicopter division

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Speaker 1: business down in the Southwest, and I think very recently

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Speaker 1: we announced that we just responded to the final kind

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Speaker 1: of position of the RFI and our best and final

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Speaker 1: offer had gone in so hopefully that program will continue

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Speaker 1: to progress in line with the mod's stated requirements. But

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Speaker 1: of course across the spectrum, whether it's support to Typhoon,

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Speaker 1: or whether it's gcap or it's maintaining the existing rotary

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Speaker 1: fleet we have in the Southwest, or even the work

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Speaker 1: we do in the Cyber Division, all of those programs

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Speaker 1: are continuing. And of course as we see more activity,

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Speaker 1: particularly support with the typhoon fleet for example, of our

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Speaker 1: partners in other organizations, you're seeing an uptick in requirements

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Speaker 1: and spare in having that capability back in the UK

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Speaker 1: to support them absolutely critical and that's why I'm really

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Speaker 1: pleased at some of that investments flowing through in terms

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Speaker 1: of jobs and skills. So we're going to take another

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Speaker 1: one thousand employees this year alone. Many of those are

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Speaker 1: very high skilled jobs, which is what the government wants

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Speaker 1: in terms of that growth agenda.

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Speaker 2: But is that any different than what you might have

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Speaker 2: taken on in terms of workers and young engineers, young

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Speaker 2: young employees.

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Speaker 1: I would say it's higher because we look to replace

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Speaker 1: turnover of course, and because of the sector we're in,

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Speaker 1: you have to have security clearance, so that does restrict

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Speaker 1: the type of demographic we can go for. Sometimes but

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Speaker 1: given that flow through of work in GCAP in particular,

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Speaker 1: on top of the continue to support for Typhoon, and

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Speaker 1: I would say thanks to the UK government for the

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Speaker 1: export support as well, because we're seeing a lot of

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Speaker 1: interest in international partners around the typhoon program. That's driving requirements,

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Speaker 1: so that means that we've got to get the skills

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Speaker 1: on board as quickly as possible. And in the regions

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Speaker 1: that we operate in, that's really important because a number

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Speaker 1: of our sites are located in areas which have challenging

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Speaker 1: social issues, so that investment that we can put into

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Speaker 1: that local community really does have a catalytical, catalytic effect

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Speaker 1: on what goes on there.

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Speaker 2: Okay, perhaps I'll come back to that. Is there some

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Speaker 2: frustration though with whether the rhetoric is going to match

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Speaker 2: the money and the action currently and the government is

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Speaker 2: talking about much more speed and yet Europe is talking

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Speaker 2: about huge sums to be invested in European defense spending. Yes,

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Speaker 2: they're coming from further back maybe nationally, but actually is

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Speaker 2: there some level of frustration that actually things are not

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Speaker 2: The rhetoric is there, but the orders and the investment

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Speaker 2: is still a long way off.

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Speaker 1: I think what will be interesting is we're awaiting a

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Speaker 1: number of significant reviews. So we know the Strategic Defense

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Speaker 1: Review is coming, We've got the Comprehensive Spending Review coming,

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Speaker 1: We've got the Industrial Strategy Defense industrial strategies. So I

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Speaker 1: think my plea would be, let's get those through quickly.

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Speaker 1: There are bound to be some tough decisions for government

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Speaker 1: in terms of spending priorities, whether that be CSR, Comprehensive

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Speaker 1: Spending Review, or defense itself. The ambitions there, but of

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Speaker 1: course the current funding twenty twenty seven is still a

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Speaker 1: few years away. The challenge will be to maintain and

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Speaker 1: ensure that we've got those capabilities that we need and

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Speaker 1: we're looking to the future quickly. People will talk a

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Speaker 1: lot about autonomy and autonomous capabilities coming through. Well, those

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Speaker 1: types of technologies need developing, they need funding. We need

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Speaker 1: to look at the R and D coming through. So

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Speaker 1: Leonardo alone last year invested over five hundred million in

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Speaker 1: R and D for example. That's the type of partnership

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Speaker 1: and government that Defense can deliver now through the primes

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Speaker 1: supporting SME. So how can we ensure that that funding

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Speaker 1: flow comes through. You mentioned Europe, and I think it's

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Speaker 1: really interesting because from a Leonardo perspective, we're seeing a

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Speaker 1: lot of collaboration now across the European domain and also

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Speaker 1: slightly outside with Baker in Turkey as well. But recapitalization

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Speaker 1: of land capabilities for sure, huge partnerships coming with Ryman

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Speaker 1: Tallin in Leonardo around land vehicles. But we're seeing states

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Speaker 1: like the German's invest significant amounts in defense and that

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Speaker 1: money starting to flow through. I would say, probably quicker

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Speaker 1: than we would have expected, but it's now starting to happen.

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Speaker 2: The government is insistent on its agenda for economic growth,

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Speaker 2: and almost everything that it does is seen through that lens,

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Speaker 2: including defense. Is it really possible to see it that

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Speaker 2: way or does the priority simply have to be on

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Speaker 2: rebuilding the military and defense capabilities and supply chains. You know,

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Speaker 2: if you've see everything through a lens of building local jobs,

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Speaker 2: that can you can't ride two horses at the same time.

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Speaker 1: I think it's always as a balance, for sure. I

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Speaker 1: think historically the approach to defense acquisition has been on

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Speaker 1: a kind of lowest cost approach, what's going to be

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Speaker 1: the least expensive to the taxpayer. I think that approach

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Speaker 1: has its merits, but then just takes away from the

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Speaker 1: social impact you can have through good defense jobs, and

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Speaker 1: we see it across the UK. Now where you've got

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Speaker 1: a anchor defense industry, you do see wealth generation, you

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Speaker 1: see that interaction with local communities. So we will undoubtedly

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Speaker 1: have to look at capabilities that don't exist on shoring

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Speaker 1: work with partners internationally, but I think we do have

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Speaker 1: to start prioritizing who are those national champions almost in

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Speaker 1: particular capability areas, what are the strategic assets we want

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Speaker 1: to maintain in the UK And through existing mechanisms we

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Speaker 1: have the single Source regulations for example, some great work

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Speaker 1: from the team they're working with SMBs, working with Primes

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Speaker 1: to ensure that we're flowing defense spending down into supply chains,

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Speaker 1: keeping that resilient. So there's a balance. But I think

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Speaker 1: this week as we testify, if you if the government

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Speaker 1: invests one pound in Leonardo, you get a two pounds

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Speaker 1: forty return, that's Oxford Economics data. So what that then

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Speaker 1: gives you the ability to export as well, because in

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Speaker 1: the UK you generate intellectual property, which means that you

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Speaker 1: can then export that to international partners.