DIC makes compelling bid for defence industrial strategy

Posted on 3 Sep 2009 by The Manufacturer

Britain needs to invest in its defence industry and fast-track a defence industrial strategy or the UK economy will suffer, say the findings of two reports launched today by the Defence Industries Council and a leading think tank.

The Defence Industries Council (DIC) today published two reports setting out the indispensible nature of the defence industry for the UK in terms of security, jobs and engineering excellence.

The Defence Industries Council’s reports offer a ‘route out of recession’ for the UK based on a compelling analysis of the economic benefits of investing in defence. 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 defence industry is also 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. This risks overlooking the country’s manufacturing, engineering and service excellence and how it is harnessed to equip and support the armed forces.

The report therefore also aims to reconnect the public with the industry and re-engage them in discussing the wider issue of defence.

The reports are released at a pivotal time for the UK defence and aerospace sectors. The Strategic Defence Review is due to be published this year for the next parliament. Defence spending is under the microscope as the main political parties weigh up sections of public spending for likely cuts. And the industry has faced criticism for wasting money on the Chinook Mk3 helicopter programme, and other expensive and protracted military contracts are under pressure in light of the recession.

Mike Turner, chairman of the Defence Industries Council and chairman of Babcock International, 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.

“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.

The reports emphasise the knock-on benefits to the wider economy from defence industry activities, in non-defence supply chains and knowledge transfer. Oxford Economics research claims that a £100m investment in defence leads to a £227m output. Added value per employee – or the contribution made by each employee in the defence sector – is also high, significantly higher than the national average.

Mike Turner adds: “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.”

Defence costs every UK citizen £11 per week, the cost of a quarter of a tank of petrol. However, despite this relatively modest budget — when compared to other Government departments or historical levels of defence spending — what it buys is vital to the country and its interests. Furthermore, the defence and security sector reaches all corners of the economy and of the country. For example, practically every Parliamentary constituency has a connection to the defence and security industry.

UK defence and security sector facts:
• Employs over 300,000 people across all regions of the UK.
• 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.
• Exports on average £5bn per year.
• Supplies 10 per cent of all manufacturing jobs in Britain.
• Has 13 out of The Times’ top 100 most sought after graduate employers (2008), more
than in IT, legal or retail.
• 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.
• Generates 1.6 new jobs elsewhere in the economy for every new job created in the
defence industry.
• Exports are at the rate of four times more per worker than the automotive sector and
is 15 per cent more productive than the UK manufacturing average.
• 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.

Source: DIC and SBAC

The reports also highlight:
• Cutting defence projects on financial grounds alone would be counter-productive.
Instead these projects represent a route out of recession. A study by Oxford Economics shows that 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. A £100m investment in defence leads to a £227m output.
• Defence and security enables the UK Government to target economic decisions directly to benefit the economy. This can also lead to an increased return on the investment via exports.
• The UK operates in coalitions across the globe but also needs to reserve its independence of action at times. To do so we need a domestic defence industry that prioritises the needs of the UK armed forces and to avoid any supplier country
preventing the UK from acting in its interests by withholding equipment. The industry’s ability to supply and support the most advanced and effective equipment capable of standing up to and defeating evolving threats is therefore an essential part
of UK military capability.