SA defence businesses struggle with slashed programs and years-long wait for AUKUS subs work

SA defence companies are having to lay off workers and switch sectors as defence contracts dry up.

SA defence companies struggling with a “sustained valley of death” in work contracts are being forced to lay off workers, close businesses and search for new work in the mining or energy sectors.

As major federal defence programs end and a lag in work on the much-heralded nuclear-powered submarine contract continues to impact, some companies “have gone to the wall”, according to the state’s peak defence industry body.

Defence Teaming Centre (DTC) chief executive officer Libby Day said defence reviews dropped this year and have led to more than 300 contracts being “either downgraded or done away with”.

After the federal budget revealed “slim pickings”, Ms Day said “that’s when the industry went ‘oh wow, hell, this is an interesting time we are going back into’.”

DTC chief Libby Day says some SA defence companies have collapsed while others are searching for work elsewhere.

While there are huge opportunities ahead through the AUKUS agreement, Ms Day said most companies were having to either rethink their approach to the international supply chain, look at other industries for work and “a small handful are getting out altogether”.

“They are looking at other sectors …. (and) we do know of instances where businesses have gone to the wall, not so many in SA, in other states they have had programs cut as well,” she said.

“Some have had to put off some workers.

“(Some companies) are looking at sectors like mining, future plans for hydrogen, that also require engineering and STEM skills … so they are gaining skills that hold and they can bring them back into (defence) programs as things mature and change.”

The DTC has about 230 members including primes, small and medium sized businesses, and was now focused on supporting companies already reeling after the French submarine contract collapsed under the former Liberal government.

At the epicentre is plans for SA to be integral to the government’s largest capability project to acquire nuclear-powered and conventionally armed submarines that will be built at Osborne under an up to $368 billion AUKUS agreement with the United States and the United Kingdom.

The federal government has said first steel on the submarines will be cut in SA this decade but it would be some time before the state will reap its full benefits.

Minister for Defence Richard Marles and Premier Peter Malinauskas signing a co-operation agreement over the AUKUS nuclear submarine agreement last year at Osborne Naval Shipyard in Adelaide. Picture: Supplied

Two important memorandums of understanding signed between the DTC and its equivalents in the United States are expected to create “speed dating on steroids” for companies to fight for work in global defence industry markets.

Ms Day said a trilateral agreement with SENEDIA, the Alliance for Defense Tech, Talent, and Innovation and the UTIC, the Undersea Technology Innovation Consortium gave an opening to a major US defence congress in Washington.

“If we are going to continue with this sustained valley of death that will help them survive, it will help them overcome the shortcomings now and stay in the sector,” Ms Day said.

SA Defence and Space Industries Minister Stephen Mullighan said the “valley of death” has been addressed by the Federal Government with a continuous shipbuild in South Australia, citing the Hunter Class Frigates program that is now underway.

He also listed $2b being spent on expanding the Osborne shipyard, overseas defence companies opening offices in SA as work ramps up, Saab Australia having put on “hundreds of new workers” and future submarine project opportunities.

“The number one issue raised with me is labour shortages,” he said.