The UK and Europe are developing two similar types of combat aircraft, namely the UK Tempest and the European Future Combat Air System (FCAS). The Tempest will start to replace the Eurofighter Typhoon from about 2035. Tempest is a sixth-generation fighter aircraft incorporating advanced technologies such as AI and stealth. In December 2022, it became the Global Combat Aircraft Programme (GCAP) and an international partnership between the UK, Italy and Japan, with the first flight of a demonstrator planned for 2026-27. The three partners in Tempest have named the joint venture ‘Edgewing’ and they will have equal shares in the joint venture which is based in Reading, UK. There will be international consortia for the engine and electronics. Currently, estimated production is between 290 and 350 units, without exports.
The Rivals
The European rival is the French-German-Spanish consortium of Dassault, Airbus and Indra Sistemas developing the Future Combat Air System (FCAS), also known as the Next Generation Weapon System (NGWS). This was launched in 2017 to replace the Rafale and Typhoon by 2040; it will be nuclear and carrier capable. The first flight of a demonstrator is planned for around 2027. Dassault is the prime contractor and Airbus will develop the drone carrier. Already, there have been disagreements between Dassault and Airbus over the prime contractorship, work sharing, intellectual property and the aircraft’s operational role with a French requirement for a nuclear and aircraft carrier role; such disagreements continued to March 2026. Possible solutions to the disagreement include an independent German development of a fighter aircraft, German withdrawal from the programme and German membership of the GCAP (Tempest) programme which will be explored below.
“There have been disagreements between Dassault and Airbus over the prime contractorship, work sharing, intellectual property and the aircraft’s operational role with a French requirement for a nuclear and aircraft carrier role”
The USA is developing a rival aircraft, the F-47, next generation, sixth generation or Next Generation Air Dominance programme to replace the F-22 Raptor. It will be an air superiority fighter with advanced stealth capabilities and a possible buy of 185 to about 200 units. First flight is scheduled for 2028, operational by 2029 and a programme development cost of $20 billion. It will be built at the St Louis Missouri plant. A cheaper rival is the US F-35 aircraft already in service and available for purchase but at a much lower technology level.
The Options for the UK
The UK can proceed with its Tempest programme or purchase a European rival such as the FCAS or the US F-47; it could also opt to buy more US F-35 aircraft. The advantages of the US F-35 is that the aircraft is operational, the UK already employs the F-35B and has ordered F-35As whilst its rivals are ‘paper designs’ and sixth generation fighters. The choice between the aircraft can be made using cost-benefit analysis or other methods of project appraisal (such as real options analysis).
Some of the elements of a cost benefit analysis for the Tempest and rival FCAS projects are shown in Table 1.1 For the Tempest, UK jobs, productivity, some regional impacts and wider economic benefits are shown. The jobs impact of the FCAS for France only and over four nations are also shown. The France-only data are taken as the equivalent of the UK so that comparisons can be made with the UK data; but the output numbers are not on a comparable basis.
Output determines unit costs. For Tempest, output estimates range from 290-350 units. For FCAS there are some output estimates ranging from lower bound figures of 200-300 units to upper bound figures of 250-600 units and a mid-range estimate of 465 units2.
| UK Tempest aircraft | Some benefits |
|---|---|
| Tempest: Jobs per annum (direct, indirect, induced). | 21,000 jobs. |
| Effects on productivity. | 78% higher than national average. |
| Location. | Jobs mainly in NW and SW regions. |
| Wider economic benefits. | Skills spillovers; R&D spillovers; regional development. Exports not included in estimates. |
| FCAS aircraft. | |
| France only: direct, indirect, induced. | 43,000 jobs. |
| Four nations (France, Germany, Spain, Belgium): direct, indirect and induced. | 125,000 jobs. |
| Other benefits. | Additional gross value added; tax return; technology spillovers. |
Continuing controversy about the FCAS and future European defence policy raises questions about the economic sense of Europe developing two similar types of combat aircraft. European defence policy aims to strengthen its defence industrial base by reducing duplication and fragmentation. For example, there are too many different types of defence equipment produced at a small scale so failing to exploit scale economies. The Tempest and FCAS projects are classic examples of European duplication. What might be the economic case for merging both projects and building one European combat aircraft?
A merger of the two combat aircraft projects?
Cost savings are a major economic case for merging the two projects. Output is a major determinant of unit costs, both unit total costs and unit production costs. The immediate economic benefit of a merger would be cost savings from a larger output. The fixed costs of development would be shared over a larger number of partner nations. Six nation states would share development costs compared with three nations without a merger. Also, there would be economies of scale and learning from the larger output of a six-nation programme. A six-nation programme might double output from, say, 300 units to 600 units which would lead to learning economies of some 5-10% in unit production costs. Cost savings might be even greater if the merged project leads to more exports.
But we cannot assume everything remains unchanged with the merger. Total development and production costs might increase with more partner nations. There are likely to be cost penalties with more nations added to the club. A six-nation collaboration would be large number of partners for a combat aircraft. Eurofighter Typhoon involved four equal partner nations so a six-nation collaboration is a significant increase and would likely increase total development and production costs, but questions arise about how much would costs increase? There is a precedent: the Airbus A400M airlifter is a collaboration involving five major buying nations (France, Germany, Spain, UK, Turkey), so there is previous experience of a large international collaboration approaching a six-nation partnership. However, this partnership has not been problem-free. There have been problems with the A400M airlifter involving its engine and gearbox, cost overruns and delays in delivery.
“A six-nation programme might double output from, say, 300 units to 600 units which would lead to learning economies of some 5-10% in unit production costs. Cost savings might be even greater if the merged project leads to more exports.”
Numbers of aircraft ordered might be a problem with questions about the economic viability of a three-nation project. But a six-nation collaboration means more national orders (600 versus 300 units). There are also precedents on the size of national orders. The UK supported the development costs of three separate designs for its V-bomber fleet with a total order of over 300 aircraft so that national orders for some 600 units from a six-nation project becomes more economically viable.
Challenges for a Six Nation Collaboration
A six-nation project would still be an ‘Augustine’ weapons system. These are very costly high technology projects produced in small numbers with high unit costs meaning that they are almost too costly to lose in conflict! Even more so against cheap drones which have revolutionised the economics of warfare. Named after Norman Augustine, who became Lockheed Martin’s President in 1995, he famously forecast that by the year 2054, the entire US defence budget would purchase just one aircraft.
A six-nation project also raises questions about controlling the costs of such an international partnership. More partners mean greater pressure to increase both development and production costs. Each partner nation will demand its own flight-testing centre and a national production final assembly line. Similarly, each partner will have its national monitoring arrangements which will need to be duplicated so further adding to costs. None of these problems are necessarily sources of cost increases. There are measures which can be taken to mitigate pressures to increase costs from more partner nations. For example, not all partners might be treated as prime contractors: it might be agreed that there be only two primes. Also, equity in work sharing can be achieved through sharing production work with say, one partner manufacturing all wings or other parts of the aircraft. The relevant point is to achieve cost efficient work sharing between all partners and to avoid inefficient work sharing. In other words, the model of an efficient international collaboration requires the creation of partnerships which closely resemble the single prime contractor model. The aim is to avoid creating a producer group which maximises costs and cost increases. All too often, collaborative projects are characterised by rising costs and delays.
The Buy American option
The UK might consider buying a US combat aircraft and there are at least two options, namely, the new F-47 or the F-35 aircraft. The F-47 is the modern–equivalent of the F-22 Raptor aircraft: the latest all singing and dancing top of the range combat aircraft. But it will be costly, with unit costs probably at three times the unit cost of the F-35, say, some $300million. There might be a work sharing package on the F-47 similar to the UK work sharing on the F-35. The F-35 is much cheaper but is not a sixth-generation fighter like the F-47. Also, a US buy would involve import costs.
Conclusion
A six-nation partnership for Europe’s future combat aircraft project is an attractive and economically viable project. It would reduce duplication and would attract increased export orders. It would also demonstrate that Europe is serious about coordinating its defence policy and avoiding fragmentation and duplication of national defence orders. But France might be a barrier in the form of the Dassault company.
Here, a possible solution would be the formation of a joint BAE/Dassault company similar to the arrangements for the Anglo-French Jaguar aircraft. This was a 1960s aircraft originally conceived as a jet trainer which eventually became a strike aircraft manufactured by SEPECAT, a joint venture between the French company Breguet and BAC, the British Aircraft Corporation. Breguet was subsequently acquired by Dassault in 1971. On this basis, and experience with Concorde, there is a precedent for Anglo-French cooperation at both the Government and industrial levels.
ENDNOTES
1. ‘Expected economic impact of the Tempest programme (2021-2050), Final Report, PwC (2021), London.
2. Tobias Mueller (2025); ‘The economic costs and benefits of the European Future Combat Air System’, Defence and Peace Economics, vol 36, number 6, October, 875-904.
