Royal Navy faces its own Financial Credit Crunch
13 October 2008

I’m writing this editorial on the same day that the UK Treasury has spent  £37 billion on buying bank shares – equivalent to the entire annual UK defence budget (£38 billion in 2008/09) and about three times what the Royal Navy expects to send on its shipbuilding programme for the next ten years (£14 billion).

The Royal Navy faces a renewed budget crisis as any hope that the Ministry of Defence’s desperate pleas for additional funding (with a background of increasing public and press support for this) have now been torpedoed by the collapse in the financial markets.  Defence cuts and force reductions remain the order of the day for the government - regardless of risks being highlighted by former and even currently serving senior officers.   Indeed the Defence Budget is likely to be particularly targeted by a nearly as desperate Treasury for a possible “peace dividend” when UK forces withdraw from Iraq, perhaps as early as next year. 

Any remaining hope by the Royal Navy that the “temporary” cuts made to Commander in Chief Fleet's budget for maintaining and operating the fleet will be restored, have turned to dust.  Even worse, the Royal Navy (excluding the Royal Marines) faces disproportionate cuts as the Army and to some extent the RAF convincingly plead overstretch in Afghanistan and Iraq. 

Just how desperate the day to day funding situation now is has been highlight by the revelation that that since December the Type 42 destroyers HMS Exeter and HMS Southampton have been operating without operational Sea Dart missile systems, and most recently that they and sister ship HMS Nottingham have been decommissioned at short notice – the direct saving to the MOD of laying up 12% of the Royal Navy’s escort force is unlikely to be more than £50 million over the next year.

HMS Daring with an RAF Typhoon making a low level pass

With the pay-off of these three Type 42 destroyers, the Royal Navy has just 22 escorts left in service compared to the 35 that it had when Labour entered government in 1997.  As recently as 2005 the RN was promised 25 but the number will now inevitably drop below 20 over the next decade.  Although six Daring-class Type 45 destroyers will replace the five remaining Type 42 destroyers, the four Type 22 Batch 3 – due to pay-off in between 2015 and 2018 - will apparently not be replaced, leaving just six Type 45 destroyers and up to thirteen Type 23 frigates in service.

 The government has recently “advanced” the in-service date of the first Future Surface Combatant to about 2019, clearly forgetting that the date was originally 2012 until it started to delay the programme in 2001.  It seems all but certain that the first FSC is now slated to replace the Type 23 frigate HMS Argyll rather than a Type 22 frigate.

The submarine service is also badly feeling the pinch.  Although spending on the Vanguard-class replacement Future Submarine is rapidly ramping up (£200 million this year), the 18-month drum beat for new submarines stated in the December 2005 Defence Industrial Strategy has already become a bad joke.  The battle to ensure that seven or even eight Astute-class attack submarines are ordered has now retreated to a desperate effort to ensure that six are built.

But perhaps the most worryingly developments concern the Fleet Air Arm.  In recent years the editor of this website has often made gloomy predictions about the ability of Royal Navy to provide a respectable air group for two Queen Elizabeth-class aircraft carriers now on order. 

Officially the new carriers will typically carry 4 Maritime Airborne Surveillance and Control aircraft, up to 36 Joint Combat Aircraft, and up six Merlin helicopters.  Unfortunately MASC has never been funded, and it is unlikely that Planning Round 2009 (PR09) will be any different in this aspect.  The Royal Navy now expects to retain the current Sea King ASaC.7 in service until at least 2018, but this represents an act of faith in the longevity of airframes which in some cases are already over 40 years old.

The most serious problem for Fleet Air Arm relates to the Joint Combat Aircraft (JCA) project.  The MOD expects to spend about £10 billion on the project, including about $2 billion (perhaps £1.3 billion allowing for very fluctuating exchange rates over nearly a decade) already committed to developing the Lockheed-Martin F-35 Joint Strike Fighter (JSF) which was selected as JCA in 2003.  If we are to believe published statements on the MOD website, it still hopes to buy “up to 150” JSFs for its remaining £8.7 billion ($14.9 billion at current rates), even though for the last few years 80-90 aircraft has seemed to be far more realistic. 

There has long been a suspicion that the publicly announced cost of the JSF was highly optimistic and recently official American sources have been indicating about $69 million as the [fly away] unit cost for the lowest cost F-35A variant, which is very significant increase from the $45 million being mentioned in 2005.  The more complex F-35B STOVL seems to be about $15 million more expensive.

On 26 September 2008 a very interesting notice was published by the US Defense Security Cooperation Agency stating that Israel planned to spend US$15.2 billion (about £8.9 billion at current exchange rates) on acquiring up to  75 F-35A and F-35B JSF’s.  This notice is the first firm indication of the actual cost of operational JSF combat aircraft, and shows just how far removed this is from the advertised fly away price.  It would seem that about $200 million is per aircraft system price when everything need to actually maintain and operate the aircraft is included, e.g. Electronic Warfare Systems; purchase and integration of unique national systems; Flight Trainers;, flight test instrumentation, support equipment, tools and test equipment, spares and repair parts, personnel training and training equipment, publications and technical documents, contractor engineering and logistics personnel services, etc.

First fight of the Lockheed Martin F-35B in June 2008.  The Royal Navy still hopes that Naval Air Squadrons  800 and 801 squadrons will eventually reform, each equipped with at least nine of these aircraft.

In 2001 the MoD said that it expected UK JSF production costs to be "under £40 million" each, but the UK will now struggle to get even 75 aircraft for its money, and it should be noted that in recent years the RAF has been arguing hard for at least 24 of these to be allocated as a Tornado strike aircraft replacement against its Deep and Persistent Offensive Capability requirement.

Another very serious problem is that the UK seems to be legally committed to ordering next year 88 Tranche 3 Typhoons at an estimated cost of £7 billion (I’ve been unable to find an official cost), but the MOD simply doesn’t have the budget to buy both these and a significant number of JCA’s simultaneously.  With an either/or choice becoming inevitable, senior Royal Air Force officers are hinting that if the service absolutely had to make a choice between Typhoon Tranche 3 and the Joint Combat Aircraft, it would prefer the former. 

The MOD and Treasury are now apparently eagerly considering the prospective savings from an RAF equipped with just Typhoon “fast jets”, with barely a thought for the “bride left at the altar” – the Royal Navy's new aircraft carriers (CVF).  Regardless of the wording of Key User Requirement Number 8 – “CVF shall be able to operate the largest possible range of aircraft” the current design is optimised for the operation of the Lockheed Martin F-35B Joint Strike Fighter.  The CVF design could be changed to a conventional configuration with catapults and arresting gear (CATOBAR), but this would cost an additional £400-500 million which the Royal Navy simply doesn’t have, and anyway the UK would still need to buy suitable aircraft such as the FA-18E/F Super Hornet. 

A sight unlikely to be seen before 2019 - if ever.  A Queen Elizabeth-class carrier with a squadron of F-35B Joint Strike Fighters embarked.

As a sop to the Royal Navy, the discredited “Plan B” idea of modifying some of the Tranche 3 Typhoon's to make them carrier compatible has again been floated, and a leak to the Sunday Times suggested that BAE Systems carried out a study earlier this year which determined that the aircraft could be built to land on carriers without major difficulty.  However it should be pointed that earlier studies were apparently far less confident, and in May 2001 Sir Robert Walmsley - then Head of the Defence Procurement Agency - when asked by the House of Commons Defence Select Committee about the possibility of a navalised Eurofighter said: "It [Typhoon] is not currently designed so that it could use a carrier.  We could change the design but we would be faced with a huge piece of work.  The materials would probably have to be changed in order to avoid corrosion; the weight of the undercarriage would have to be doubled to support carrier landing which would eat into the payload margin; and the wing roots would have to be strengthened in order to take the full inertia forces on landing. That sounds to me like a very substantial redesign.  It is always possible, but it would cost a huge amount of money and it would certainly add very considerably to the cost of the aircraft".

The Fleet Air Arm's Naval Strike Wing is equipped with nine Harrier GR.9/9A aircraft, and probably will be for at least another decade.

What seems most likely to happen is that next spring the MOD will order two or even three (thus confounding some critics) F-35B’s for trials and evaluation purposes.  There will then be a cross finger period while it is hoped that the UK can offload some of it’s unwanted Typhoon’s to Saudi Arabia or another country, thus releasing funding for JCA.   Failing this, a small (25-30 aircraft?) production buy of F-35B’s seems inevitable eventually in order to avoid the considerable embarrassment of building expensive new strike carriers without any no strike aircraft, but no earlier than 2012.

The exact date of this order will depend upon the feasibility of stretching the out-of-service date of the Harrier GR.9 beyond the current target of "at least 2019", at least in sufficient numbers to continue to equip the Naval Strike Wing [squadron] which seems less and less likely to ever reform as two separate Harrier GR.9 equipped squadrons - 800 and 801 - as still officially planned.

It has become a reasonable analysis to project that for at least five years (2014 - 2019) the Royal Navy’s "largest ever warships" will operate an air group consisting of ancient Sea King’s, a few Merlin’s, and occasionally a small number of rebuilt but still sub-sonic and short legged Harrier’s.  Around 2020 the Sea King's will be replaced by newer helicopters, quite possibly carrying carrying old radars and mission systems transferred from the Sea King's; whilst the Harriers will be replaced by a similar number of F-35B's.  I sadly prophesize that if HMS Queen Elizabeth or HMS Prince of Wales ever carry more than 18 F-35B's, that is because a US Marine Corps squadron has been embarked for an exercise.