"Add Two Type 45s to your shopping basket? - Click here to purchase". The reason the UK can't just 'buy two more Type 45s'...

This article was born out of suggestions elsewhere on this site about the feasibility of the UK deciding to order an additional pair of Type 45 destroyers to bolster the Royal Navy’s (RN) escort fleet. The purpose of this article is to try to explain the financial context when they were cancelled, and also consider some of the challenges involved in trying to complete two new T45s now.

From the outset, let’s be extremely clear. This article is not saying that the UK could not build two more Type 45s – if the will is there, and the budget exists to do so, then anything is possible. As will be seen though, the challenge is trying to do so in a manner which makes rational sense.

Background

As many readers will recall, the T45 programme originally had its roots in the NATO standard Frigate, then Horizon project of the 1980s and 1990s. Following UK withdrawal from this project, the T45 emerged as a national design, albeit similar in some ways to the Franco / Italian vessels. The initial requirement was for 12 hulls, on a one for one replacement for the T42s then in service in the mid-1990s.

The SDR saw the first draw down in the T42 fleet, losing BIRMINGHAM to cuts when it reduced from 35-32 escorts in 1998. As the RN went from 32 to 25 in 2004, the remaining early T42s were included in the sale, decommissioning a couple of years early, although in reality they were in such poor material state by then that it was not a major loss. Around this time the requirement for 12 hulls was reduced to 8, to reflect the reduced destroyer requirement.

At this time the intent remained to order a further batch of two Type 45s at some point – Six were already on order and firmly ensconced in the planning budget. By 2008 though the decision had been taken to cancel the batch two vessels, as part of wider planning round considerations which saw the surface fleet reduced to just 23 hulls.

HMS DUNCAN ready to launch (Copyright STV)

PR08

If you ever want to get an involuntary shudder from a Whitehall escapee, and then ensure they spend the rest of the evening moaning quietly in the corner, in the manner of a prisoner from Azkaban who has been caught by the Dementors, then just say the dreaded words ‘Planning Round’.

In the somewhat complex world of MOD finances, a range of methods have been used in recent years to try to plan the forward budget. The author is aware that the system used has changed once again, although he is not familiar with its new construct.

In the mid-2000s though, the MOD used a system known as Planning Rounds (PR) to try to manage the complexity of not only the equipment programme, but also the wider defence budget. The theory was very sound, every two years the MOD would conduct an examination of its budget, and ensure that sufficient funding existed to put all planned programmes and projects into service. Where there was a mismatch in funding, through the use of reduced spending totals, different budgetary areas would seek to cut spending to meet the new total. In order to identify these cuts, wider ranges of potential cuts were considered and presented as ‘Options’. The options were scrutinised at varying levels, enabling packages of cuts to be drawn up which in turn would meet varying savings targets.

In theory, if this worked correctly then it would deliver a balanced budget every two years, ensuring that the MOD could plan with a certain degree of confidence. The idealised ‘Planning Round’ process would in tabular format, look a little something like this, albeit vastly simplified.

Stage	Planned Activity
1	MOD Centre issued total budget. Advises all commands of their own budget totals.
2	Each TLB, (or Capability area in CTLB /DE&S) review budget totals, consider how to make savings in line with any guidance from Centre (e.g. don’t even think about deleting Project X).
3	Savings totals cascaded down from TLB to team level. Teams spend time considering where savings can be made, both in year, and also in follow on 10 year programme. Options drawn up which identify varying levels of cuts.
4	Savings options generated across TLB, presented to senior TLB management for consideration. Overall package put together and submitted to Centre.
5	Centre TLB considers all submissions, decides which combination of options to take, or asks for further cuts in specific areas. Period of redrafting commences, prior to acceptance of final package.
6	Final package, containing agreement on both cuts, and any compensating enhancements to the budget to reflect changes or operational issues, agreed and put in front of Defence Board, then Ministers for final approval.
7	Ministers sign off on package, books balance, and MOD budget is secure.

This is the theory at least. In reality, there was far more leaking, counter briefing, ‘disagreement’ and other problems associated with the process. An outsider could usually tell what stage the planning round was at by the type of options being discussed, and the level of outrage displayed. As a general rule this author normally saw leaks to the Daily Telegraph or Mail as being ‘first innings’ designed to head off things like ‘disbanding the Parachute Regiment’. By the time leaks had reached the Guardian or Independent, they were generally at the point of concluding the process and putting more accurate stories out there.

In the case of the T45, the decision to axe the Batch Two purchase would have been taken at a time when there was significant pressure on the budget. The lack of an update to the SDR since 1998 meant that the Forces were required to plan on assumptions which were out of date, and not funded, but which Ministers had not overturned. At the same time, on-going operations in Iraq and Afghanistan were squeezing the medium term budget – not the UOR territory, but rather seeing emphasis on  equipment entering service in the medium term, ensuring changes were made to keep it relevant to developments in theatre. Add to this the reality that there was too much in the programme, vying for funding at a time when cash was declining in real terms, and suddenly there is a major squeeze on the budget.

The problem with buying the hulls isn’t finding £750m per hull (or thereabouts) in one year to fund the vessel. In the UK system, procurement doesn’t simply send a large cheque to the builders in return for a vessel in a few years’ time. Rather, the system breaks expenditure down over several years, with different sums being injected at different points. It is likely (although Humphrey cannot confirm) that the spend profile for the T45 would have clashed with other spending profiles. When it came to try to balance the budget out, not just in year, but also out to five – ten years’ time, there would have been too much pressure in the system. The option to delete the last two T45s would have freed up cash, not only in the short term, but also in the medium term, thus helping alleviate pressure on the budget.

So, in reality, the cancellation of T45 reflected the reality of a Department desperately trying to save funding across a variety of budgetary areas. Not just in procurement, but support, manpower, training, and all the other aspects of vessel procurement. The potential package of savings accrued could easily have meant the difference between cancelling multiple projects, possibly impacting on current land operations and just cancelling one. In the end, the decision was taken to go for the T45 cancellation.

But why not now?

Let us assume for a moment then that for reasons unknown, the decision is taken tomorrow to order an additional two Type 45 destroyers. The question is, could it be done?

Firstly the question is, where does the money come from? The forward programme has been done on the assumption that no further T45s are to be bought. This means that the RN has to identify where the near to £2 Billion would come from to fund the hulls. Assuming it still takes seven years from lay down to completion (and a further one – two years prior to actually start the process off), that is a very significant new amount of cash to find in the current programme, both in year, and over the next seven years. So, the first question the RN Resources&Planning staff would need to identify is ‘what is to be cut to make this happen’.

The next challenge is the issue of cost. Although the unit cost of Type 45s has fallen over time, this is due to economies of scale in producing 6 sets of equipment, plus spares. These savings are likely to be lost with any new builds, as the production lines for much of the equipment could either be shut down, or would need to be restarted. This would incur extra cost to the manufacturer, who would pass it on to the MOD. The only way that the RN is likely to get similar economies of scale again would be if another navy were to order a batch of four hulls, and a follow up order were tagged on for the RN. So, to generate an additional two hulls, the costs would be significantly greater than for the first batch of vessels.

Timing is also a problem – on current timelines it is taking an average of six – seven years from steel cutting through to commissioning. On average it is then taking a further one – two years to bring the vessel to a point where she is deployable as a worked up unit, able to be programmed by HQ NAVY to conduct deployments. If a vessel was ordered tomorrow, the absolute earliest that she would be in service and able to conduct tasking is 2020. The first issue is that the RN will have borne a significant gap (in the region of 10 years) with only six destroyers, so it is hard to justify inserting a further two units in at this point. The second issue is that of fleet age. The rest of the T45 fleet will be somewhere between six and twelve years old. Creating a second batch of two hulls that are significantly younger will be useful in providing more hulls, more capability and more availability now. But, as the T45 fleet gets older and approaches pay off dates, it will be harder to justify the two younger hulls continued service. They will be significantly younger than their sisters, and as the rest of the class pay off, running on a batch of just two hulls will be expensive. The RN tends to quickly dispose of small classes – look at the way that the residual Batch Two Type 22s were quickly sacrificed in the post SDR environment. One would struggle to see the RN retaining two younger T45s, particularly if replacements were inbound. Therefore, any further batch would probably see much less service than the current ones.

In terms of support and manning, providing two additional Type 45s would raise a significant cost and manpower burden on the fleet. The RN has scaled itself to provide spares for six hulls. An additional two hulls means increasing spares by 33% above the existing fleet, which in turn would mean extra funding for parts, supplies, maintenance and munitions. Even basic issues like Sea Viper war shots, helicopter fleets, ammunition for 4.5” guns and the like would need to be increased. The funding for this is not in place at present. It’s not that the RN can’t find this funding, but that it will cost more to fund it than previously expected – this money has to be found from commensurate savings elsewhere.

 'Manning Computer Says No’

Even manning the ships would prove a challenge. By 2020 the RN expects to have a force of roughly 22,000 sailors, and 7500 Royal Marines. Once you remove the submarine service, Fleet Air Arm, and the various support elements, the actual sea going element of the naval service will be quite small. A force of 19 escorts would need approximately 3400 personnel to man them at full capacity (so some 15% of the Naval Service). Adding an extra 380 personnel at all ranks / rates to man two extra Type 45s will increase the total to 3800 personnel – or over 10% increase in manning needs.

This may not sound much, but it would present structural changes to the RN. It’s not just a case of saying ‘here are 380 sailors, make it happen’, it’s a case of providing 380 sailors, then providing them with reliefs, then ensuring capacity for career development, and also for their reliefs to be relieved. Harmony time is crucial – keep someone at sea for too long and they will become burnt out and put their notice in. So, you need to recruit sufficient personnel to ensure people get regular shore drafts, and the opportunity to do broadening tours for career development. It also has an impact on things like branch promotion structures – on the face of it adding two extra hulls with opportunities is great, but where are you going to put the extra personnel when not onboard? How do you maintain a balanced career path, to ensure that the young 18 year old AB joining HMS RALEIGH remains in the service to become a 35 year old CPO in charge of a department?

The RN has reduced its manning requirements since SDSR, and the recruiting taps are only half open. The last time the RN shut recruiting entirely was in the early 1990s, nearly 20 years ago. The effects of this are still being felt in the system now, with a major lack of SNCOs in some areas. The reverse is also true- to crew two additional T45s in the 2020s would need a lot of work now to put people into service to get training, experience, and the rate to man the ship properly. Again, it’s not that it can’t be done, but it would take a lot of time, effort and hard cash to increase recruitment in the right areas – this would be a slow process. It isn’t a case of saying ‘here are two ships go sail them’, it’s an incredibly complex process of trying to work out where you get the 380 people from to not just sail the ships, but fight them, and win, in the most demanding scenarios imaginable.

The final point is perhaps the best reason why it would be near impossible to achieve this. There is simply no room in the construction yards to build two additional Type 45s. As was seen in the award of the MARS tanker project to Korea, the current UK shipbuilding industry is operating at peak capacity – the CVF programme is in pure tonnage terms providing the equivalent of 20 Type 45 destroyers worth of construction. The yards are full with CVF work now, and in a few years’ time will be ramping up to construct Type 26. To inject two additional Type 45s now would throw that programme into disarray as the yards struggle to work out how they can actually build the vessels. It’s not just a case of laying some steel down and a new ship popping up. T45s are built across multiple yards in parts, so it would need all the component yards to work together to fit it into their programme. They’d also need to work out how to take on the extra staff, who would then need to be made redundant later on as the workflow dropped off again. One of the key successes of the terms of business agreement is that the shipyards can plan for an agreed level of work. Adding ships in to this actually throws the plan into confusion as the yards have to resource to a higher level than before, incurring additional costs, and probably delaying both CVF and T26.

It is not impossible to build extra ships. That much is clear – if the willpower is there, then it can be done. But the days of shipyards existing in a short term environment, dependent on the next RN order, whatever it may be, are all but gone. The issue is the preservation of key skills, such as ship design and also high end manufacture of critical components, and doing so in a manner which makes the industry sustainable for the long term, and not the ‘boom and bust’ approach of the last century.

Summary
Reviewing what was written, it’s hard to avoid the impression that this piece feels somewhat negative, an effort to try and explain why ‘computer says no’. But the problem that the MOD has is trying to get itself into a position where it is sustainable and can actually afford to buy what it wants, without losing the industries that it needs to keep it in business for the long haul. Adding two Type 45s into production now sounds brilliant – it would win votes, it would keep supporters of the Navy happy, and the RN would be delighted. The problem is that it would cost an enormous amount of cash, it would cause major manpower problems, and it would threaten to unravel the UK shipbuilding industry as it currently stands.

If Ministers wished to enlarge the RN escort fleet, the easiest way to do so would be by procuring extra Type 26 escorts in due course, and then planning to build more T45 replacements in 20-30 years time. Sadly the days when an extra batch of vessels can just be rustled up are over, no matter how wonderful it would be to see more Type 45s in service.

 One final point. This argument is not exclusive to the RN - any navy in the world seeking to build more ships would find itself facing similar problems