Transparency and accountability in defence offset : a case study of the United Kingdom

In recent years, the global defence market has changed, shifting from a seller’s market, with limited suppliers facing a high demand, to a buyer’s market, in which growing numbers of suppliers compete for limited sales. In this intensely competitive environment, exporters sell arms not only on the basis of price and quality, but also on the attractiveness of the parallel offset package. Offset, crudely defined as ‘reciprocal investment’, is allegedly prone to corruption. This debate has sparked a global controversy, and likely changed European offset policy, albeit that no hard data exists to support the case that offset is tainted with corruption. A 2010 Transparency International Report argued that corruption is endemic in offset programmes, but the evidence advanced by the report confuses defence procurement with offset. Thus, the jury is still out as to whether corruption practices are part and parcel of offset arrangements. Accordingly, the purpose of this study is to determine the nature and extent of corruption in UK defence offset programmes. Due to the sensitivity of the topic, it was felt appropriate to focus attention on ethical compliance as the primary research objective, and its application to offset as the secondary goal. Senior representatives from three of the UK’s top aerospace and defence companies were interviewed to establish the nature and degree of corporate ethical compliance at the corporate, national and international levels. Analysis of the interview data was framed against the 2008 Woolf Report recommendations. The overall research findings suggest that the UK companies operate a rigorous and robust set of ethical compliance measures, covering commercial activities, including offset. This supports a conclusion that broad-based UK defence-related ethical compliance procedures are some of the most stringent in the world. Whilst corruption allegations still surface, they are rooted in historical arms deals contracted before implementation of the Woolf Reports recommendations.