Blain’s Morning Porridge June 18th, 2026 – G7, Brexit, Europe, Markets and Defence!
“After all, we’re all on the same team… aren’t we?”
What is the point of the G7 meetings? The issues are clear: growth, defence, security and future threats – like the developing El-Nino. Instead, the leaders dance around the Orange Man, ignoring the fragmentation around them. If we are going to put Europe on track, we have to identify the problems and address them at root. Capital Markets and Defence are examples of where it’s gone wrong – and we have solutions!
What were they really thinking about at the G7 Meeting? For some leaders it may have been a blessed relief to get away from mounting domestic political pressures. For others an opportunity for a brief spell in the reflected sunlight of the event – smiling as they demonstrated they had a seat at, or adjacent to, the table. (Adjacent – word of the decade – it means SFA.) For most their biggest fear would have been the challenge of dealing with Donald Trump. But it was an older, orange-er, heavier looking Trump who grumped over the event. He may be telling everyone he was the boss and he got what he wanted from Iran… but the most dangerous 4 words in politics are “doesn’t he look tired.”
What if everyone suddenly stopped trying to fool themselves and admitted the truth? That Iran was a mistake, and the deal is an advance in a rearward’s direction allowing Trump exit before the mid-terms sink him utterly? Or maybe we should admit the dismal failure of growth here in Europe and come up with a plan? Maybe Sir Keir Starmer is secretly delighted he’ll be able to exit the UK premiership after Andy Burnham or A.N. Other replaces him, allowing him to get back to some proper legal stuff? Or maybe Nigel, Boris and the rest will stand up next week, on the 10th Anniversary of the UK’s Brexit Referendum, and say sorry?
Pigs might fly. Yet, no one who is remotely honest will argue Brexit has been a success. No one can cite one single thing that has made Britain better as a result. Everyone knows the No Vote has held back growth and made life in Blighty more difficult. Brexit has also disillusioned Europe. Losing the UK has impacted the European dream more than the Europeans are prepared to admit. Here on our little Island at the unfashionable edge of Europe, where the Continent can be cut off by the weather for days at a time, we don’t realise how much damage we’ve done.
The French smugly anticipated they would reap the rewards of Brexit, stepping up into London’s shoes to become the dominant powerbroker in Europe, brushing aside the too polite Germans. They also expected an economic uplift as financial markets crossed Le Manche from London to Paris. Neither has happened. Instead, Germany and France are poles apart – and both are facing nihilistic political populism causing the dream of a European polity to fade. The scale and connectivity of European capital markets have actually shrunk – American firms are now unchallenged and dominant in Global Finance, and Europe does not interest them.
One of the major reasons for American market exceptionalism, the strength of US tech, and the incredible valuations of US firms is the efficiency of their lightly regulated, deep-pocket capital markets. A deep and efficient Capital Market is a critical component of a successful capitalist democracy. Despite trillions of Euros in savings and investments, Europe lacks a unified, effective market to direct capital into growth – unlike America which can and often does over-financepromising looking firms.
Germany is now making lots of noise about expanding its army and doing its own thing to guarantee its security – a clear divergence. If the right-wing Russian apologists of the AfD were to seize power, it’s not clear what role Germany would play in European defence, or how that could change the polarity of the European polity.
Since Brexit, populism and dissent make it feel that Europe has reverted to being a string of small, non-integrated, over-regulated and over-bureaucratised nations protecting themselves rather than exhibiting global ambition. Many perceive a risk Europe reverts back to its tribal roots and a border mentality similar to that which defined Europe in 400 years of regional hegemonic conflict from 1550-1945: Spain vs Holland and England in the 16th century, the Thirty Years War in Mittle Europe in the 17th Century, then the French problem as the War of the Spanish Succession, the Seven Years War, and the Napoleonic Wars rolled from 1700-1815, followed by German unification and unpleasantness through the Austro-Prussian War and the French-German Wars of 1870-1945.
After the Second World War, there was the Cold War followed by the ever-so-fragile peace which is now unravelling as Russia tries to play in the big leagues. It’s no secret Europe relied on the USA too much as it recovered from war. It let America do the heavy lifting, backing NATO through that period. America profited greatly – but now demands the Trump dividend. (I understand Trump tried to again bring up his demand that Europe give him Greenland at the event!)
The consequence of stepping back and becoming an American protectorate over the last 80 years has impacted Europe badly. In many European states our best and brightest people now work for US firms, and our most promising firms and technology have been scooped up and patriated to the states. The resilience of Europe towards challenge and struggle has withered as cotton-wooled welfare states have replaced what were once empire building ambitions.
The close links that once existed between the military and populations has diminished. Most European nations would struggle to put their economies into wartime mode, to raise armies, and spin resources and cash away from welfare into cannons. (Except in Scandinavia – where everyone expects to fight when push comes to shove.)
Even in the face of strife with Russia, and the tension as the USA and Europe disengage, the concept of a European polity representing Europe as whole feels to be slipping. Nowhere is that more clearly illustrated in Finance where Europe lacks scale and mass, and in Defence, where it lacks the foresight and wisdom to accept a European rather than national solutions. These should be political imperatives – but they have become matters of national self-interest.
The scale of breakdown is most apparent in the big prestige military procurement programmes. That’s partly because no one can agree what is needed, but also because politicians increasingly understand that grand, cooperative, procurement systems are unfit for purpose. The big programmes that make the Defence Primes so wealthy are designed to trickle out expensive, over-engineered weapons that fought yesterday’s wars, but won’t be ready for another 10-years or so!
What we need is battlespace dominant, war-winning adaptable new defence platforms today – now! Some economies are adapting to that challenge – copying what Ukraine has done to create a swift, effective defence marketplaces for warfighters rather than allowing bureaucrats to make the decisions on how to fight. Others are still arguing about the number of angels on a laser sensor.
Last week the French and Germans abandoned the Future Combat Air System – FCAS, an effort to design a new 6thGeneration Fighter Jet. They were divided by multiple issues; the French firm Dassault wanted total control the project and the Germans (Airbus) wanted to see the production and rights fairly distributed. The French wanted a does-everything, state-of-the-art thing of beauty that could be launched from its rather small aircraft carrier, while the Germans wanted a cheap and cheerful combat fighter and strike bomber.
Most interestingly the Spanish, the junior partners in the FCAS, (led by Indra), were close to developing an integrated data management system of sensors, AI, and network connectivity that would have enabled a so called Combat Cloud of the fighter and multiple fighter drones around it work together – a major paradigm shift in how air-warfare will develop. Unfortunately, the Spanish lack the tech and production expertise to put the whole 6th Gen Fighter and Combat Cloud project together themselves. (I am thinking to myself the Spanish and the Swedes should get talking – combine Indra and Saab to design the kind of “now” Smart-Fighter Europe needs!)
Perhaps the new Global Combat Air Programme (GCAP) between the UK, Italy and Japan can succeed in giving Europe and Allied Asia a war-winning 6th Generation Fighter? Probably not. Its already struggling because Britain can’t commit the necessary money to put it into development, and experience is against them. The Tempest’s co-developed predecessors, the 1980s Tornado and the 2000s Typhoon, emerged as rather meh, compromised platforms that did little useful but did what they could do at very, very high cost.
Could a new unified European programme be put together? The potential upside is huge, but the likely downside bigger. The French and the Brits arguing about everything, the Germans increasingly looking to do their own thing. As I said, if the Spanish, the pragmatic Poles and the Scandinavians could fund, design and build a cheap, cheerful updated Sabb Grippen it might be the best solution on the basis its available now and does what it says on the tin.
Again, everyone has different ideas of what it wants. An air defence fighter, a missile and drone interceptor, a strike bomber, a battlespace dominator? But no one knows what the battlespace will look like in 10-15 years’ time when the first of the new European fighters might just be entering service. A cheap solution would acknowledge the future of air-warfare is an unknown because of the increasing efficiency of ground-based AA and long-range hypersonic Chinese AA missiles (as employed by Pakistan against India last year), so a new plan would have to be built from the get-go as an adaptable platform. What is clear is that what is needed is planes that can be upgraded and modernised to counter the changing realities of the swiftly evolving battlespace.
If you need a model – then the UK’s Spitfire is a good one. From 1939 to 1945 the Spitfire was the only WW2 plane that remained best-in-class as it went through 24 different model versions, each getting better, adapting, and staying ahead of the opposition. The design, the classic elliptical wing, the weapons and the engine all evolved, but it remained a Spitfire. It remained the interceptor par excellence, proving adaptable and effective. As Luftwaffe ace Adolf Galland said: “Give me a Staffel (Squadron) of Spitfires!”)
Meanwhile, it’s not just in the air that spending on grandiose “exquisite” prestige projects can’t be agreed upon. Britain is currently upgrading its miniscule fleet of cobbled together Challenger 2 tanks to call them, imaginatively, Challenger 3. It will have a new turret (which currently doesn’t work) and a gun common with other NATO tanks. It will cost more billions and is years away. Yet a few months ago, 10, yes 10, Ukrainian drone operators took out a whole squadron of UK tanks on an exercise in minutes.
I am currently reading Tank Command, an excellent book by the former Colonel of the Royal Tank Regiment, Hamish de Bretton-Gordon. He looks at how tanks have developed, been countered, yet remained current on the battlefield for the last 110 years. In Ukraine, the battlespace most closely resembles deadlocked first World War stalemate. Tanks are little more than bunkers. Yet, it was in trench warfare that the “Landship” was first conceived as the way to break the deadlock.
For Tanks to regain the initiative, and for mobile warfare to break the stalemate, as demonstrated by the British Army at the Battle of Amiens in 1918, Guderian’s 1940 Blitzkrieg, Rommel in North Africa, and Bretton-Gordon himself as young commander in the Gulf War, the tank will have to evolve to address drone and other threats. (The Israelis have some very promising tech to counter such threats.)
Again, what will be need is swift and immediately available systems that can be mass produced, fitted to current platforms, and used now – because 5 minutes after they first appear, you can bet the Russians will be attempting to counter them.
The key to getting such systems into production and into the hands of the warfighters isn’t by investing in the big defence primes – who just want to make lots of money from gold-plated long-term projects – but to use capital markets to allocate that cash to the young, hungry start-ups that are making new tech available today. That’s the revolution that’s occurred in Ukraine – giving warfighters what they need. Not what Procurement agencies are willing to give them in a decade or so!
And that is exactly what we’ve set up Spitfire Strategic Capital to do – identifying the here and now defence innovations that will win!
Enough marketing – out of time and off to catch a train to do the day job…
Bill Blain
Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital
Meanwhile, don’t forget about my new book:
The Battle For Hamble is a proper grown-up examination of how bureaucracy has failed: a tale of Greedy Corporates, Bad Planning and Economic Illiteracy. It explains how a wholly unnecessary Gravel Quarry will be dug in middle of a prosperous village – putting 6000 jobs at risk. The truth is no one wants gravel, and the quarry company understands it’s not what you dig out, but what you stuff back into a hole in the ground that matters. Gravel sells for £30 a tonne – Landfill earns £150 a tonne to bury. Go figure.
