Blain’s Morning Porridge 16th December, 2025: The New Economics and Investibility of Defence
“The war was started by career soldiers, but will be finished by teachers, engineers and accountants.”
Ukraine has demonstrated massive changes in how future wars will be fought. Yet, the military bureaucracies of Western Nations are mired in the procurement-treacle of 80 years of peacetime spending. It’s time for radical overhaul, and an explosion of private-funding to build a stronger Western economy through aggressive deterrence.
One of the big market themes I’ve been drawn to is the rising threat of conflict involving what is left of the now fracturing Western Alliance. That’s why I’m now an Advisor to Spitfire Strategic Capital – a highly innovative defence fund. If you had asked me if a general European War was likely 5-years ago, I would have laughed. Today – it’s a substantial economic risk that could swamp supply chains, economies and markets. The World changes faster than we think.
The most basic duty of any state is security. Europe and the UK are guilty of failure. As the USA retreats from foreign entanglements, it’s time for a massive European policy shift to be seen to be acting with purpose and alignment.
The threat is very real. Yesterday the new head of Britain’s MI6, Blaise Metreweli, warned Russia is deliberately prolonging the war in Ukraine, and has no intention of signing any peace deal. She described how the UK and Europe are in a grey area, caught between peace and war with “an aggressive, expansionist and revisionist” Russia as Putin tests the limits across Nato through cyber-attacks, sabotage and drone intrusions. The head of the UK’s defence staff, Air Chief Marshal Richard Knighton, later warned of coming conflict in Europe that will require similar sacrifices as were made in the second World War, and that the UK is woefully underprepared.
The war in Ukraine has taught many lessons. Everyone will be familiar with the leaps in drone technology. The new economics of warfare – the unsustainability of spending millions on an interceptor missile to shoot down a drone costing a few hundred of dollars when the enemy is mounting swarm attacks numbered in the thousands, and the entire inventory of missile inceptors is measured in dozens – is brutal. Ukrainian pop-up factories close to the frontlines churn out thousands of attack drones each day – but it takes months to build expensive interceptors.
It’s not just drone warfare that’s experienced a paradigm shift. The whole defence sector is unrecognisable from just a decade ago. Invention and innovation leap forward in times of war.
Yet, its not just about tech. A Navy Captain, just returned from a long patrol through contested, potentially hostile waters was asked what he considered the biggest tactical risk facing him and his crew in the new battlespace. His response was illuminating: “A critical piece of technology failing just when we need it.”
Front line troops, the warfighters, need equipment that is functional, effective, replaceable and easily supplied – and they need it now. The battlespace in Ukraine has proved not to be about the sophisticated, complex and very expensive weaponry that 80 years of peace have given us. It now takes decades to design, build and introduce new systems like fighters or ships, by which time new tech may well have already rendered them obsolete. The Royal Navy has 2 marvellous aircraft carriers – but the Chinese have very accurate ballistic ship killing missiles.
At its most basic, Warfare has not changed – it’s about taking opportunities, countering threats and stopping the opposition from doing the same. But wars are won by logistics. In Ukraine how to reliably supply troops with munitions, water and food when there is a 20km drone dead zone around the front is a new challenge. Immediate innovation of drone counters – like the Russians using long fibre optic cables to counter interference – is happening all the time.
Innovation isn’t just happening in the battlespace. During her speech MI6’s Metreweli also warned how the power of new technology is moving from governments to corporates and even individuals (she was clearly referring to unnamed Tech Billionaires), who could have the ability to use AI and hype-personalised tools to target us all individually with the aim of “dividing communities and distorting reality”. Some would say Elon Musk’s interventions in support of Trump during the 2024 demonstrate what could be possible.
The UK spends £60 bln a year on defence, but what has it got us? At present there is zero defence against a missile attack – the only capability is the Navy’s Type 45 destroyers and their anti-air missiles. They are highly effective, but most of these very expensive destroyers are tied up waiting for repair and are short of crews. The shocking Wargame podcast (which ran a scenario of a Russian attack on the UK) envisaged only 2 of them in service. One was sunk on its mooring in Portsmouth in a first strike, while the other only carried a half-load of missiles – to save money!
Dominating the defence headlines in the UK today is the sorry saga of the Ajax Fighting Vehicle. Its only now coming into service, a decade late, and it’s already been withdrawn after noise and vibrations made dozens of soldiers on an exercise sick. The whole acquisition process around the vehicle, built by General Dynamics, has been a sordid tale of incompetence across the procurement bureaucracy. Originally conceived as a replacement light reconnaissance vehicle, it morphed into compromised monstrosity heavier than a World War 2 tank to fill multiple unlinked roles, with untested systems and armaments, and serious design flaws making it more dangerous to its crews than any enemy. (Great articles here and here if you want to learn more.)
When I was at University 40 years ago I wrote my masters dissertation on why UK defence procurement led to successive failures – at the time Westland was collapsing due to arguments on helicopter policy (ultimately losing the UK a leading position in the helicopter industry), while there was another car-crash of procurement policy around the UK’s first AEW (airborne early warning) system, based on the already venerable Nimrod – the superb maritime submarine hunter.
Why does procurement fail? The conventional reasons include the domination of the defence sector by “The Primes” (I also like the term Military Industrial Complex) which dominate the manufacture and supply of weaponry. They frame contracts in cost-plus terms, which means they aren’t on the line as they “persuade” the procurement officials to gold-plate projects. The military love it – a base model tank is soon double its design weight as extras are added on.
Some gold plating is useful – which is why British Tanks all come with a fitted water boiler. (Any Tank crew will tell you the “Cooking Vessel FV706656” kettle is critical kit, allowing them to operate within the tank comfortably, fortified with endless cups of tea for days on end.) Much of it is useless – especially when front line troops need weapons now. Frontline troops value sensors and tech, but their immediate survival is down to the reliability, operability, and resilience of their weapons and plentiful ammunition.
Other reasons for the failure of procurement include the establishment of military and civil service bureaucracies, a lack of project management skills, poorly framed kit requirements, a lack of any clear understanding of what the threats may be. When the Royal Navy ordered it’s 2 floating targets, what future threat were they designed to counter? The consequence of overly complex, bureaucratised procurement chains is delay and inefficiency as government purchasing becomes even less efficient as a monopoly buyer of defence services and equipment.
The Ukrainians have found a partial solution through market solutions. The government quickly realised speed was critical and bureaucracy a roadblock. Now the Ukrainian Army’s 130 frontline brigades order their kit directly from suppliers on digital marketplaces. The government doesn’t interfere except to pay the bills! Delivery times are measured in days, with frontline troops giving direct feedback to the arms makers. I’ve met an Estonian firm that has designed and supplied front-line pop-up drone factories for units to use close to their operational front! It works – the creation of a real-time defence markets!
Here in the UK we don’t really know how Government is going to fund defence after 2027. At present Premier Sir Kier Starmer is caught between his back-benchers demanding rises in welfare spending, and the hope a Ukraine peace deal – which looks like appeasement – will free up the defence spending to be allocated to the ravening maw of the NHS. That would be a disaster. Europe and the UK desperately need to combine and defend themselves in an increasingly dangerous and unstable world.
There will be no welfare spending on anything if the basic duty of defending the nation is further neglected!
As part of Windshift Capital I’m now spending time as an advisor to Spitfire Strategic Capital (check out the website). We’re currently in our first capital raise. The fund is investing in innovative, adaptive, next-gen defence platforms to accelerate the deployment of war-winning weapons to tip the battlespace back in favour of the West. The aim is the reestablishment of full-spectrum deterrence.
One of the key points made by the UK’s chief of the defence staff yesterday was the criticality of private capital to fund innovation and the rearmament of the West. We are on it….
Out of time, and back to the day job…
Bill Blain
CEO – Windshift Capital
Author – The Morning Porridge
Partner – Shard Capital
Special Advisor – Spitfire Strategic Capital
4 Comments
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Masses of T34s and Sherman tanks helped win WWII, not a few Tiger and Panther thanks.
Absolutely..
The story there is the Germans built the best tanks of the war, the Tiger. It was powerful, but complex, thirsty, heavy and difficult to move.
A German General commented “The Tiger is worth 4 Shermans, but the Tommies always show up with 5 of them!” The Germans only built 1500 tigers. THe Americans built over 40,000 Shermans. The T-34 was basic but as good as anything else. (The Christie suspension was actually a US design the Russians had flitched from the Yanks – and the Panther was the “improved” German response.)
Germans made the same mistake repeatedly – trying to make too many different designs and trying to make better rather than just producing more and training more crews. I saw a study recently suggesting the Germans squandered an even higher percentage of their defence spending than America spent on the B-29 programme (the most expensive programme of WW2 – even more than Manhattan), on the Heinkel 177, a two engined bomber that kept catching fire. (Incidently – B-29s did that as well, and the wing collapsed!)
And thats the point I was making…. The Russians could assemble the T-34 in Lenningrad factories and send them straight into battle unpainted. The Germans had better tanks, but quantity has a quality all of its own. That’s what’s needed on the front lines – available resources, cheap and effective. VHS rather than Betamax. Same thing is happening in AI!
You’ll notice that every “Russia specialist”, and indeed almost everybody who speaks Russian (I’m one) is screaming as loudly as they can about the threat that Putin (and his regime) represents not just to Ukraine but to Europe. The thought that he will be satisfied with just the Donbass is for the birds; from Vladivostock to Lisbon is the war cry..
And yet nothing seems to cut through – even though we are in real danger. (How many times have presenters on Russian state TV fantasised about nuking Britain – do you imagine they would be allowed to do this without Putin’s specific say so? (In Piter the offices of Channel 1 and the Kremlin are in the same building and on the same floor – giving out an order is literally just popping across the corridor)).
It’s well worth putting video of Putin in 2000 against video of Putin now, and comparing how they speak. He was always cold, cruel and cynical, of course – always KGB. But the decay in his language skills and the development of his paranoid megalomania over the years is shocking to see.
IMO, it is well past time for Keir Starmer to level with the British people. Trump’s America is no longer a reliable ally, or perhaps even any kind of ally at all; Russia is a mortal threat; we must turn to Europe and cooperate on defence.
THe UK needs to spend more and better on defence – kit, munitions, recruitment and delivery.
It can be done by borrowing more, or cutting other spending.
This has not happened overnight – its a discussion the current prime minister should have initaited with the public prior to the last election.
The real test of Democracy is yet to come – can a nation choose to make difficult swinging cuts before it is forced to do so by conflict?