Arms industry seeks civilian role: David Bowen reports on responses to a steady loss of defence orders and jobs

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LAST WEEK'S job cuts at Rosyth and Devonport added to the despair in the defence world. In the year to April, more than 22,000 defence-related redundancies were announced in the services, the dockyards and the private sector.

Since then, Swan Hunter has gone into receivership. And last week the last submarine built by Cammell Laird at Birkenhead was handed over to the Navy. The news that Vickers had won its first order for Challenger tanks was a rare beacon of light in the gloom.

Defence experts believe job losses arising out of the end of the Cold War and the Government's 'Options for Change' programme will continue for many years. The Research Unit in Defence Economics at the University of the West of England, in Bristol, has recently upgraded the number of defence- related jobs in the South-west it thinks will go this decade from 40,000 to 60,000. 'We haven't seen the worst of it yet,' said Paul Dowdall, the unit's commercial director.

He believes competition abroad will become stiffer as companies are forced to look for export orders. The answer for some companies will be to merge or make alliances with European rivals to compete with the Americans, whose higher volumes tend to lead to lower costs.

But for most companies now dependent on defence, the solution will be to adapt to the civilian world. Many will find this impossible, and Mr Dowdall said this could be economically damaging. 'Take away the word defence, and you are are talking about the very kernel of the UK's industrial and technological base,' he said. Many companies that are not obviously defence contractors, such as precision engineers and software firms, have relied on military work.

Mr Dowdall said he interviewed companies throughout the supply chain of a Rolls- Royce aero-engine factory. 'Right in the middle of it we got to precision engineering companies, which were having the hardest time.' One company with expertise in specialist materials had tried to move into the medical field, making artificial joints, but had found the competition too tough and ended up switching to a much lower-technology product. 'They didn't have the culture to make the change.'

Though recent headlines have been made by cuts in the North and Scotland - Rosyth, Swan Hunter at Newcastle, Cammell Laird at Birkenhead - greater pain is likely to be felt in areas unused to economic deprivation, and nowhere more than Hertfordshire.

In Luton last week, Simon Smith, head of project management in Hertfordshire County Council's planning department, was sporting flying goggles and helmet. They were made by a local company, Ford Halcyon, which sells them to sports car drivers and microlight pilots in 30 countries. He and his chief executive, Brian Briscoe, were making the point that it is possible to convert military technology to civilian use. His audience consisted of managers from local defence-related companies coming to terms with the new world.

Hertfordshire's unemployment rate has risen faster than anywhere else in Britain in the past three years - from a rock- bottom 2 per cent to 8.8 per cent, close to the 10.2 per cent national average. In Stevenage, the worst-hit town, male unemployment is 11.7 per cent.

According to a study by the Centre of Defence Economics at York University, 17,500 defence jobs have been lost in Hertfordshire since 1991 - half of all those lost in the South-east. British Aerospace alone has accounted for 7,500 after scaling down its huge site at Hatfield.

But it is the smaller companies that are causing most concern. This is why the county is trying so hard to get a share of the pounds 16m allocated to the UK under the EC's Konver programme. This provides 50 per cent funding for schemes that retrain defence workers and help smaller companies to refocus. The Government is now deciding whether Konver funds can be given to areas previously ineligible for aid; if it says no, Hertfordshire's companies will be left to struggle on their own.

Nick Hooper, deputy director of the York centre, said that Konver was designed to help high-technology companies that have their work cut out trying to find new uses for their expertise. Hertfordshire wants to provide seminars, consultants and even non-executive directors to help them change: many are used to working for one customer and may not even have a marketing department.

Local authorities have also set up the Campaign for Defence Dependent Communities to press the Government to soften the effects of the cuts. So far, job creation initiatives have been piecemeal, with no large-scale schemes, such as those run by British Steel and British Coal.

Mr Hooper said there was a danger that the defence industry would be swamped by a new wave of cuts. 'What we have seen so far is a Treasury-driven search for savings.'

Things could get even worse. 'We haven't seen a complete reappraisal of Britain's foreign and military policy. There are signs that the Ministry of Defence is thinking along those lines - and that could lead to more fundamental changes than we have seen so far.'

(Photograph omitted)