On July 25/07, new UK Prime Minister Gordon Brown announced that the UK MoD Defence Export Services Organisation (DESO) will be shut down. The agency was set up in 1966, when the UK arms industry was largely state-owned and concerned with selling off surplus equipment. Neither of these premises remain true, but as all government agencies tend to do, it has shifted its mission to fulfill other needs within its client base. According to The Guardian, DESO lobbies within Whitehall for export licences, and spends £15 million per year to help British firms sell equipment abroad. British firms pay below-market fees in return for these services. Industrial promotion activities will be shifted into the Department of Trade & Industry (now the Department for Business, Enterprise and Regulatory Reform), with the implementation plan scheduled for finalization by the end of 2007.
Left-wing organizations like Campaign Against Arms Trade (CAAT) have lobbied for DESO’s demise since 1974. In the end, however, DESO appears to have been done in by opposition from Treasury officials on corporate subsidy grounds. Political observers will recall that Treasury has been Mr. Brown’s cabinet department for many years under former Prime Minister Tony Blair. DESO has also been caught up in the scandal over the GBP 43 billion Saudi Al-Yamamah framework, which is connected to Saudi buys of Tornado aircraft and maintenance services and its still-pending purchase of the BAE/EADS Eurofighter.
The UK defence industry, whose exports sit at GBP 5-6 billion per year, is deeply unhappy with the announcement, whose content and timing reportedly surprised them. DESO’s has now been dissolved, and its successor has begun operations, despite BAE Systems CEO Mike Turner’s letter that said: