Cold War consolidation

The defence industry has played a significant part in the UK's industrial base for centuries. A large empire to police ensured that the UK maintained a defence industrial capacity unequalled anywhere else in the world, but the country's diminishing role as an economic and military superpower after the Second World War led to a gradual decline of its military industrial capabilities.

Duncan Sandys’ notorious 1957 Defence White Paper came at a time that Britain was suffering from economic problems and was loosing influence as a world power. It had a major impact on Britain's defence industry with a significant reduction in the size of the armed forces and defence procurement. The White Paper also encouraged consolidation within the defence sector. As a result, Britain's main aerospace companies -- the Bristol Aeroplane Company, English Electric Aviation and
Vickers-Armstrong -- merged in 1960 to become the British Aircraft Corporation (BAC), later being joined by Hunting Aircraft. But BAC struggled to operate effectively as it suffered from poor management and work practices as well as an inability for the company's businesses to work together properly developing and producing aircraft. The company was thrown further into disarray when major projects that would guarantee the UK’s technological edge were cancelled by the government.

BAC did, however, move towards reducing the costs of developing expensive weapon platforms by forming collaborative partnerships with France on the Sepecat Jaguar ground attack aircraft as well as Germany and Italy on the Panavia Tornado strike aircraft. Economic difficulties eventually led the Callaghan government to the nationalise and merge BAC, Hawker-Siddeley Aviation, Hawker-Siddeley Dynamics and Scottish Aviation to form British Aerospace (BAe) in 1977. The government also consolidated and nationalised the shipbuilding sector, creating the single corporation British Shipbuilders (BS).

The end of the Cold War in the early 1990s affected Britain's defence industry further with a major loss of orders as the government significantly reduced the defence budget. It has been estimated that more than 200,000 defence jobs were lost during the 1990s. And there were further efforts to consolidate the industry to meet the post-Cold War defence market with major reorganisation of Britain's biggest defence companies.

The electronics and radio equipment company General Electric Company (GEC) had merged with several companies in the late 1960s, such as the remaining parts of English Electric (its aviation business was absorbed into BAC), which included the radio manufacturer Marconi Systems. GEC acquired in 1996 the defence electronics business of Ferranti (Ferranti Defence Systems), a British electric engineering company that originally helped develop the Tornado F3's AI.24 Foxhunter and Eurofighter Typhoon's ECR-90 Captor radar, but went bankrupt in the early 1990s. After briefly being known as GEC-Marconi, GEC's defence business was renamed Marconi Electronic Systems in 1998.

The Thatcher government had sold all of its shares in BAe by 1985 and the company merged with Marconi Electronic Systems in 1999, thereby creating BAE Systems. GEC continued in business after selling Marconi Electronic Systems and was later renamed the Marconi Corporation, which was purchased by Sweden's telecommunications company Ericsson in 2006.

Other aviation companies like Westland Helicopters and Short Brothers underwent reorganisation. The Belfast-based Shorts Brothers was sold to Canada’s Bombardier Aerospace in 1989. It stopped building aircraft after completing an order in the 1980s for a modified version of the Brazilian Embraer Tucano (Shorts Tucano T1/Mk51/Mk52) for the RAF and the air forces of Kuwait and Oman, and now builds components and fuselages for Bombardier business passenger jets. Westland remained outside BAC and acquired the other British aviation manufacturers of Bristol Helicopters, Fairey Aviation and Saunders-Roe.

Troubled times for Westland in the mid-1980s led to the "Westland Affair" when the then defence secretary, Michael Heseltine, resigned from his post in protest to a Cabinet split over whether the company should become part of a proposed large European helicopter manufacturer or become part of the US’s Sikorsky. Eventually, the UK’s GKN joined forces with Sikorsky to take ownership of Westland, with GKN acquiring the whole company in 1994. GKN agreed in 1998 to merge Westland with Italy’s helicopter manufacturer Agusta (owned by Finmeccanica) creating the joint venture AgustaWestland two years later. Finmeccanica acquired GKN’s 50 per cent stake in AgustaWestland in 2004.