The DIS sets out the need to retain this capability while acknowledging that industry will have to change to meet new challenges. Launching the DIS John Reid said: "The Complex Weapons industry is very important to us and we have built-up significant expertise.

For reasons of operational sovereignty we would wish to retain in the UK the capability to design new Weapons (including upgrades), integrate them into the wider military network and support them throughout their service life. We need to retain the capability to undertake these activities independently or as a leading player in collaboration with others.

"We have made significant investment in them in recent years, driven by the introduction of new systems such as StormShadow and Brimstone. "However the scale of our investment will reduce as new Weapons Systems are brought into service. As such, there will be overcapacity in this sector and we need to work with industry to ensure the critical skills the UK requires are sustained. A team will be created to take this work forward.

Emphasising the importance of maintaining the capability in the UK, John Reid said: "Sustainment of the industry may mean we have to temper International competition in the short-term. We will also work with European allies and industry to investigate potential for restructuring across Europe, to maintain critical skills. But this will not be to the exclusion of US-owned companies, in particular those who have already established a firm foothold in the UK."

The complex weapons industry is based across the UK at many sites including Stevenage, Glenrothes and Belfast.

earlier related report
Reid Unveils Radical Overhaul of UK Defence Industry
London, UK (SPX) Dec 16 - Launching the Defence Industrial Strategy (DIS), John Reid said: "The Defence Industrial Strategy I am publishing today is as important for the defence industry as the strategic defence review was for the Armed Forces. "It is driven by our military imperative to give our Armed Forces the battle winning kit they need.

"In short today we are telling industry what we think we will need, what will be strategic to the UK, where we will be spending taxpayer's money and how we will engage with the market. "This Strategy provides outstanding clarity for industry to plan for a sustainable healthy future. "This will enable industry to deliver best value for money to us as a smart customer and ensure taxpayer's money is wisely used.

"This strategy means we will maintain the strategic skills we need for the nation and invest in the future of defence in areas like Uninhabited Aerial Vehicles. "We need the skills to fight the next war not the last one. Skills and capabilities needed by this country change over time - we do not need sword or bow and arrow factories to win wars any longer. The skills we needed in the past were rope making, sail making and signal flags.

"Now we need the high value, technological and systems engineering skills required to enable us to ensure that our current in-service fleets can be maintained, supported and upgraded and that we have in the UK the ability to build and design the sorts of equipment that we require now, d in the future. John Reid also set out the timing of the DIS: "The Government is in the middle of a major programme of transformation and is investing heavily in new ships (including Type 45 and the future Carrier), aircraft (Typhoon, Joint Combat Aircraft) and armoured fighting vehicles (FRES).

This massive programme of work means now is the best time to look beyond that period to the future. We must plan now in times of plenty for many years away when orders may be fewer.

Announcements in the DIS include:

The award of an innovative contract worth some �185 million for the support of its Turbo-Union RB199 engine to Rolls-Royce Defence Aerospace (RRDA). The engine powers the MOD's fleet of Tornado aircraft, which are in service with the Royal Air Force. Support work will be undertaken in the UK by RRDA's traditional suppliers.

Speaking at the launch Lord Drayson, Minister for Defence Procurement, who has led the DIS process, set out the challenges which face both industry and the MoD: "Delivering the DIS will require substantial changes in the way both industry and the MoD do business. This won't always be easy but is essential if we are to make it work.

"Defence procurement will be focussed on costs through life of acquisition, not just the upfront cost. "We want a Defence industry that is profitable but those profits must be earnt by good performance and delivery. Unless companies make good profits, they won't attract investors, and the country ends up paying more to equip our Forces.

"Chief of the Defence Staff (CDS) General Sir Michael Walker said: "A successful procurement process is essential for the Armed Forces. We need to make sure that wherever our forces are deployed they have the best equipment available.

"This Strategy sets out the way we want to do business in the long term and that can only be a good thing for the Forces. Whether we are talking about ships, planes or tanks we need to know that industry can deliver what we want - and the DIS will do that.

"Minister of State for Industry and the Regions, Rt. Hon Alun Michael MP said: "Our defence industry is a national asset that brings benefits at both a regional and national level. It is a technology intensive sector, providing high value jobs and productivity that contributes an estimated � 6 billion in value added to the UK economy.

"The high skills and high technology levels are real strengths that contribute to industry way beyond the defence industry itself. We would like to see those strengths spread widely across the manufacturing sectors to which these companies also contribute.

"The Defence Industrial Strategy aims to encourage the sustained investment we need across the breadth of our defence industry if we are going to succeed in raising our level of research and development investment in the UK to 2.5 per cent of GDP by 2014.

The skills base and the intellectual ability to innovate and respond to change are probably its biggest asset and our biggest asset too."

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MISSILE NEWS

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Taiwan has modified two locally manufactured aircraft to carry anti-ship missiles that could be used to attack rival China's main ports, a defence magazine said.