Philip Hammond Addresses Global Shifts, Defence & Trade at BCC Event

The British Chamber of Commerce for Luxembourg (BCC) held a “Fireside Chat” with Philip Hammond, former UK Chancellor of the Exchequer, Foreign Secretary and Defence Secretary, at Linklaters in Luxembourg-Kirchberg on Tuesday 25 February 2025.

The sold-out event saw Philip Hammond discuss geopolitical changes, defence and economic policy with journalist Duncan Roberts.

The evening began with an introduction by BCC Chairman Andrew Notter and welcome remarks by Nicki Kayser, national managing partner of Linklaters' Luxembourg office. The British Ambassador to Luxembourg, Fleur Thomas, also spoke, reflecting on key events during her tenure (which is soon coming to an end), emphasising the fast-paced nature of global affairs. These included the implementation of the EU-UK Withdrawal Agreement and the EU-UK Trade and Cooperation Agreement, the death of Queen Elizabeth II, Russia's full-scale invasion of Ukraine, and the formalisation of bilateral relations. She also introduced Philip Hammond and briefly presented his distinguished political career.

During the Fireside Chat, Philip Hammond answered questions on a variety of hot topics. He notably warned that the old world order is "broken". The re-election of US President Donald Trump may have been unexpected for some, but "Trumpism" is now becoming a broader intellectual movement. He said the US will no longer act as Europe's benevolent ally, after Europeans exploited its willingness to help "for nothing" in return for years. Europe must now adapt to a more transactional relationship with the US and navigate Trump's policies without sacrificing European values.

On democracy and youth, Philip Hammond noted that young people consume media differently and often struggle to commit to one political agenda, preferring to "pick and choose". He added that it can be difficult for western European leaders to take tough decisions and do what is necessary, as these measures are usually unpopular among voters. For Lord Hammond, western Europe is currently incapable of addressing two critical challenges: redirecting significant fiscal resources from social spending to defence, and ensuring sufficient military manpower. He added that the US has long questioned why it funds Europe's defence while Europeans prioritise social expenditure. He argued that European countries need to consider some form of compulsory military service to confront this imbalance.

Staying on the topic of defence, Philip Hammond argued for changes to NATO: Europe should fund and deliver its own conventional defence while the US provides a "nuclear umbrella". Without conscription, European countries, including the UK and Germany, will struggle to reach necessary troop levels. "What is the primary function of the state?", he asked, recalling that it is "not to keep people comfortable in old age" but rather to "defend the nation against aggression". He added that "no one wants to give up the good life we have built" during years of peacetime, yet "everyone wants to be defended and protected". 

Lord Hammond stressed the important role played by both Germany and France within Europe (also noting how the UK had served as an influential third party pre-Brexit when it came to the two countries' differences at EU level); if Germany and France were aligned on defence, they could reshape Europe's strategic position. However, European defence capabilities, such as intelligence and military logistics, continue to lag far behind those of the US.

Moreover, Philip Hammond urged a pragmatic approach to China, balancing trade and security concerns. The UK, being one of the most open economies, should welcome Chinese investment in non-sensitive areas. He stressed that it was the job of politicians to create the conditions for economic growth and high-value jobs, which may mean embracing new technologies and markets. He also mentioned Europe's lack of competitiveness and the rapidly widening gap with the US in terms of economic growth. On China-US relations (and tensions), he said the most likely outcome was that the two economic superpowers cut a deal (rather than one of the two giving in or them fighting a "war of global attrition" until one "wins").

Philip Hammond later argued that Brexit has left the UK economically adrift, unable to leverage its previous influence within the EU. The UK missed its chance to radically reshape its economy. Europe also faces economic stagnation unless it prioritises economic growth and innovation, as well as defence and security, over social spending.
Lord Hammond warned that the world does not owe Europe prosperity. He reiterated his argument that social spending is unsustainable if Europe wants to remain competitive. With the US booming while Europe lags, leaders must make tough decisions before voters turn to extremists promising unrealistic solutions.

The evening continued with a lively Q&A session, with some audience members questioning whether Europe should really be looking to follow the example of the US or certain countries in Asia (in terms of cutting social spending, etc.). Lord Hammond asked if Europe really has a choice, as it risks becoming increasingly irrelevant. Other questions touched on innovation, potential deregulation to boost economic growth and the possibility of looking outside the EU for answers, perhaps through a pan-European body or coalition which could make decisions and raise money. The discussions continued over finger food and drinks at a networking reception.