DERA has an annual turnover of £1bn, 90% of which comes from the Ministry of Defence, and is active in many areas of physics including semiconductors, materials and optics.

The agency would encourage the exploitation of defence technology by industry, and the transfer of civilian technology into military programmes. For example, in the 1960s researchers at DERA developed the liquid crystal displays that are now widely used in civilian applications. And non-defence companies have made great advances in IT. By establishing the new agency, the government hopes to transfer technologies between these sectors more efficiently.

According to the green paper, the work of the defence diversification agency would be integrated with other government departments and agencies. However, there are no details on how the agency would slot into DERA, nor how much money would be available to it. DERA is currently being reviewed as part of the strategic defence review, which is due to report in the summer. Options for DERA's future include closer relationships with the private sector, or even privatization. The IPMS, a trade union that represents scientists at DERA, welcomed the proposal to establish a defence diversification agency as strengthening the case for DERA remaining in the public sector. "It is inconceivable that the government could create a diversification agency within the Ministry of Defence and then privatize it, " says Paul Noon of the IPMS.