The primary purpose of the UK defence industry is to support the UK Government’s military objectives both domestic and abroad, promoting national security and aiding international policy.
However, within this context questions always arise as to how much it contributes ‘economically’ to national wealth.
Trade Association A|D|S has just issued a fulsome report examining the major contribution that the UK-based defence industry makes to the nation’s economy.
The purpose of the report is not to consider the right level of expenditure to support the needs of the nation and its appropriate allies, but rather to assess the size of the sector and whether increased investment in defence would be beneficial (and more so than investment in other sectors) for the economy in the current economic climate, mainly in terms of its contribution to UK gross domestic product and employment.
The report assesses in some detail how investment made in the sector would deliver an even greater return to the wider economy, as well as prevent the well-documented and risky loss of crucial capabilities for the Armed Forces.
Unintended economic consequences of defence budget cuts
Produced for A|D|S and the Defence Industries Council by Oxford Economics, the document shows the unintended economic consequences (in addition to the obvious reduction in the UK’s military capability) of the Government seeking to reduce further the defence budget.
The report also finds that, in total, the UK defence industry supported 316,000 full-time equivalent (FTE) jobs in the UK in 2008.
Furthermore, a GB pound 100 million notional investment would generate over 2,000 additional jobs in the UK in a variety of sectors.
Commenting on the report’s assessment of the situation, Ian Godden (chairman of A|D|S), explained: “The UK all-too-frequently shoots itself in the economic foot and, sadly, it risks doing so again in defence, a sector where it is globally competitive. We will live to regret the day that we put at risk fully 10% of our total manufacturing base.”
For Godden, this report highlights that a careful investment in defence will deliver major economic benefits.
“The case for investment is clear when the vocal minority’s ‘anti-defence’ rhetoric and misinformed sentiment looking to buy from other nations is stripped away,” he asserted.
“The investment would not only boost our flagging economy, but would also provide the breathing space needed to enact the major and lasting defence reforms on which to build for the longer term.”
Godden’s organisation is now calling on the Government to rethink its policy and spending priorities before the capabilities in UK industry and our Armed Forces are seriously damaged.
“In addition to the industrial impact of previous cuts,” he said, “it’s obvious to many observers that the UK has already seen a reduction in its military capability.”
“Scant regard” given to longer term consequences
At a time when the Government is looking to support our Armed Forces, boost economic growth, increase the number of high-tech and long-term jobs and raise exports, Godden stated that it’s “paradoxically cutting the funding to an industry that can deliver strongly on these aims”.
Godden recognises that the Government has to reduce the deficit and make hard choices given the financial situation that it faces, but also feels that “scant regard” has been given to the long-term consequences of defence cuts on the UK’s export-driven, advanced engineering and manufacturing sectors.
“In the current global security context, and with the clear economic benefits that this report highlights, we believe that a greater priority should be placed on defence, not least to deliver on the Government’s own policy on advanced manufacturing and on delivering Force 2020.”
Alongside an increase in employment, this nominal GB pound 100 million investment in the defence industry would also deliver an estimated GB pound 230 million of benefits to the domestic economy composed of:
Boost for jobs and the economy
Increases in investment of multiples of this GB pound 100 million would be expected to deliver commensurate increases in jobs and economic benefits.
Defence has a multiplier of 2.3, ranking it in the top five UK sectors above the likes of banking and finance (2.2), telecoms (2.1) and pharmaceuticals (2.1). This reflects a strong UK-based supply chain and a relatively high wage level paid to workers.
Industry is operating at 73% capacity, which means it has the resources at hand to meet demand both in the UK and abroad.
Godden continued: “This report highlights that an increase in investment will deliver major economic benefits far wider than just in the defence sector.”
The defence sector provides high quality employment across the whole of the UK, with a strong presence in otherwise highly-deprived areas. Godden told SMT Online that this sector has suffered from two decades of cuts or underfunding unlike many other Government departments.
“The cuts expected to follow in the next budget planning round will hit certain economically high risk areas of the country very hard. Furthermore, the 20% cumulative cut in the MoD’s research and technology budget over the last three years leaves us dangerously close to seeing UK troops with inferior equipment in the next five-to-ten years due to this fall in investment.”
Detailed findings in the A|D|S report
The new report also finds that:
The figure for 2,000 additional jobs in the UK in a variety of sectors is made up of an estimated 712 direct jobs. As a consequence of these extra jobs, a further 652 jobs would be created indirectly through the industry’s supply chain, and 645 jobs would be created through induced employee spending in the wider economy.
Download your free copy
Copies of the full report are available to download from the A|D|S website. Access the link on the right hand panel of this page
A|D|S is the Trade Association advancing UK Aerospace, Defence, Security and Space industries with Farnborough International Limited as a wholly-owned subsidiary.
A|D|S also encompasses the British Aviation Group (BAG), and was formed from the merger of the Association of Police and Public Security Suppliers (APPSS), the Defence Manufacturers Association (DMA) and the Society of British Aerospace Companies (SBAC) in October 2009.
For more information access the A|D|S website (a dedicated link is provided on the right hand panel of this page)
Further details on the work of Oxford Economics can also be found online (again, a dedicated link is provided on the right hand panel of this page)
