Defence offers the route out of recession

Tuesday, September 01, 2009

Contrary to current thinking in Westminster, now is the time to look at investing not less but more in the UK's defence and security services, two reports from the Defence Industries Council (DIC) have said

One report, produced by Oxford Economics, looks at the economic contribution that the sector makes to national life while the second, from the DIC itself, examines the support given to the UK's armed forces by the industry.

The reports also said that cutting defence projects on financial grounds alone would be counter-productive. Indeed, they claimed, the defence and security sector generates more significant benefits to the country (jobs, return to the Exchequer, GDP impact, R&D investment and export potential) than other sectors. For example, a £100m investment in defence leads to a £227m output.

The UK's defence industry is vital not only in terms of security but also jobs and engineering excellence, DIC said, claiming that the industry, which employs 300,000 people across the UK and earns £5bn in export sales per year, can also help to bring the country out of recession.

The reports said that the defence industry is concerned that the public no longer associates the country's ability to defend itself with the capability to produce the equipment for our armed forces to fulfil this role. But this risks overlooking the country's manufacturing, engineering and service excellence and how it is harnessed to equip and support the armed forces, said DIC.

Defence costs every UK citizen £11 per week – the cost of a quarter of a tank of petrol. However, despite this "relatively modest budget" what it buys is vital to the country and its interests, the reports said.

They also pointed out that the UK's defence and security sector consists of 9,000 companies of all sizes across the country, has more small and medium sized enterprises (SMEs) than France, Germany, Italy, Spain and Norway combined, had a turnover of around £35bn in 2008, supplies 10 per cent of all manufacturing jobs in Britain, and accounts for 5.6 per cent of government spending (£38bn), compared to 13 per cent on education (£88bn), 17.7 per cent on health (£119bn) and 28 per cent (£189bn) on social protection.

The reports also said that the sector generates 1.6 new jobs elsewhere in the economy for every new job created in the defence industry, its exports are at the rate of four times more per worker than the automotive sector, and it is 15 per cent more productive than the UK manufacturing average. The sector also delivers better value for money over the life of defence equipment and ensures that the country retains vital skills with which to support British armed forces in the field, the reports claimed.

DIC chairman Mike Turner said: "As the economic frailties of the British economy become more apparent there has perhaps never been a better opportunity to harness the full potential of our world-class defence and security industrial base and use it as one of the paths out of recession. This will not only provide skilled jobs it will also promote economic growth, it will also help to balance our economy and enhance our nation's defence against the growing threats – on our own streets and throughout the world."

He added: "Current global uncertainty means that the country has to be prepared for all eventualities. It is vital that the UK maintains and nurtures a home-grown ability to stand up to all potential threats – conventional, nuclear or terrorist. This can only be done with a UK-based defence industry, responsive to the nation's needs. We are determined to highlight the benefits the industry and its 300,000 employees deliver to the UK and its armed forces. We believe that, contrary to the prevailing mood in Westminster, now is the time to consider investing more for our future safety, not less.

"It is also the time to re-connect the UK defence community with the British public, not just those in uniform but also those from industry who support them at home and on operations overseas. Our aim going forward is to highlight the efforts being made by the 300,000 hardworking people in the defence and security sector and explain how it is pioneering new, more cost-effective methods for procuring, maintaining and upgrading military equipment for the armed forces so that they can protect our country and our global economic interests."