Why does the UK struggle to keep pace with rapid technological change in industries like defence and financial services? UDSS CO-Chair Peter Hewitt reflects on lessons learned from an entrepreneurial career spanning financial services to the defence sector.
He explores how the UK’s cultural fixation on risk avoidance stifles innovation and agility in critical areas like defence procurement—leading to outdated technology in the hands of warfighters—and what we can learn from the US approach to “regulating for growth.”
Most importantly, he discusses why a generational shift in attitudes toward risk and failure is essential to re-establishing the UK as a leader in technological and industrial innovation.
The English Malaise - An obsession with risk avoidance
I have been fortunate to have had an entrepreneurial career and my most recent venture, Universal Defence and Security Solutions, which I set up with General Sir Richard Barrons, some 5 years ago has not only been a change in direction but it has also been a complete education, in many ways. Having had a background in financial services, it has been a fascinating process for me to be now working in the defence industry and to realise the many similarities in their respective approaches to risk, for what on the surface, are vastly different industries.
In particular, one of the things that has struck me is the inflexibility of the procurement system within the defence industry. As we have moved into more technological based war fighting, clearly demonstrated by the war in Ukraine, the need for a more agile procurement system becomes more and more apparent. Currently, systems are specified and procured but not delivered until some years later by which time the technology has invariably changed significantly at best or at worst, become obsolete.
It is also clear that the former truism that defence was the leader in technology with the private sector following on to take commercial advantage and productise defence technological developments, is now no longer the case. Indeed, it is now the converse with the private sector now leading on technological developments which frequently can have applications in the defence industry namely dual use technology. The Space and earth observation sector being a fine example. As we all know, this technology changes and advances on a weekly basis with the inevitable redundancy of the procured technology by the time the war fighter is issued with the particular piece of kit.
This is where the problems within the financial services industry are also replicated within the defence industry and indeed it could be caused called an 'English malaise'. Specifically in the UK, our Financial Conduct Authority regulates for Risk whereas in the US for example they regulate for Growth. The UK attitude towards risk permeates virtually every aspect to UK society and so this is clearly a cultural problem that needs to be changed if we are to regain our place as a major industrial player. You only need to look at the 'health warnings that FCA requires a bank to promulgate before an individual is able to open a bank account to realise that we are a risk based culture.
There is no finer example of 'regulating for risk' than is found in the MoD procurement system (as indeed is the case throughout government) where there is a cultural aversion to decision-making – principally because of taking on the risk of possible failure. In the UK, failure is not an option and is considered a 'career buster', whereas in the US failure, as long as it is a 'lesson learnt', is seen as a positive badge to progression and does not inhibit career progression.
Whereas 'Risk' is an important component of decision making , in all too many areas of UK society, it has become the primary consideration rather than say the 'risk to reward' consideration.
We in the UK need to change this cultural attitude throughout both financial services and the defence industry as well as, I have little doubt, many other industries where risk is considered the key concern. This change needs to happen at a generational level and we need to teach our young people that to fail at an endeavour, so long as one has undertaken proper care in the decision making process, is a badge of success and not a 'career buster’.
Thus, when it comes to procurement of defence technology, the UK needs to move to a far more agile procurement process that allows our rapidly changing technological environment to be taken advantage of rather than being an inhibitor as is currently. Modern defence requires the war fighter to have at his or her fingertips the very latest technology and we owe it to those who are defending our way of life to provide this.
Peter Hewitt JP, FCSI, FRSA is Co-Chairman of Universal Defence and Security Solutions Ltd, a global defence consultancy and a non-executive director of a Venture Capital Trust. He is a former Alderman in the City of London and over his career has been a director of Chairman of 13 public companies, one of which he established and floated on AIM.
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