Growing the Contribution of Defence to UK Prosperity

Yesterday, former Minister for Defence Procurement Philip Dunne MP launched his independent review: ‘Growing the Contribution of Defence to UK Prosperity’, which highlights the vital importance of the Defence sector to the UK’s economy and makes 41 recommendations for the MOD to consider how best to improve the agility of Defence to procure the capability it needs, and for the department and defence industry more widely in meeting the challenges of the future.

Speaking at the Royal United Services Institute, he highlighted the significant contributions Defence already makes in term of UK prosperity, including:

  • 500,000 people as part of the Defence workforce (1.5% of UK total);
  • 25,500 apprentices developing skills;
  • Delivering productivity growth of 15% since 2009, three times as much as the rest of the economy; and
  • An average of £7.3bn exports per annum over the last 5 years.

The report, commissioned by the Secretary of State Gavin Williamson in support of the ongoing Modernising Defence Programme (MDP) review, highlights the wider economic impacts of UK Defence spending. This is done by drilling down beyond top line spending commitments, examining how Defence spending drives economic growth regionally, creates and safeguards jobs in the supply chain, develops highly skilled employees, and provides long term benefits for the UK workforce.

Particularly useful within the report are the regional analyses, which highlight the benefits of Defence spending in each of the UK’s regions. techUK sees this as a useful metric to measure future success, and hopes that this will continued to be refreshed in the future. We welcome this approach and hope that this report will be used to better express the value Defence brings to both the UK technology sector and the wider economy. Arguably, Defence makes a more balanced contribution to regional economies than some sectors, which tend to be centred around London and the south-east.

Similarly useful are the case studies which highlight both the obvious and indirect benefits that Defence R&D investment creates. From techUK member 2iC growing from a micro-SME to exporting CDE funded technology across the 5-Eye nations to the technologies developed at BAE Systems which now help the UK BMX team, all innovation arising from Defence investment is valuable. techUK believes that fostering cross-pollination between industrial sectors is crucial to ensure a competitive Defence sector, and would strongly encourage the MOD to open up as many routes to market as it can, engaging with companies of all sizes and specialisms to pull through disruptive new technologies. SMEs in particular were praised in the report, with Philip Dunne arguing they can play a bigger role, and are often able to deliver innovations with more agility and flexibility than other suppliers. techUK welcomes and reiterates these sentiments, urging the MOD to take advantage of strong SME capabilities both directly and through prime contractors.

None of this is possible without a highly skilled workforce. It is clear that Defence punches above its weight in terms of skills development, with 25,500 active apprentices currently enrolled across the sector and proper career-long support provided by many of the UK’s largest, best known companies. The loss of Defence related activities would damage the UK’s STEM skills base, which benefits the country as employees often move on to related jobs in adjacent sectors. techUK welcomes the report which extolls the virtues of the skills created by those working in the sector, particularly at a time when sectors are jostling for more funding and investment from the government. 

In summary, this report makes clear that Defence is a major contributor to the UK economy’s overall prosperity, especially in terms of its workforce and skills. A large proportion of Defence jobs (both serving and non-serving) are highly skilled and highly-paid, which present long term benefits for the economy. Similarly the Defence sector offers vast opportunities for exports, as demonstrated by the recent ship-building contract with Australia, showing that the sector can continue to grow its footprint internationally for the benefit of the wider UK, in all its regions. techUK hopes that this report will enable the MOD to better demonstrate the significant value of the Defence sector to the UK economy.

The report makes 41 recommendations on how the UK can embed prosperity into the thinking of MOD and improve agility throughout procurement processes. Some of these include:

  • The MOD should support DIT plans to strengthen DIT-DSO;
  • As a critical enabler of growth and productivity in both defence and the wider economy, MOD should focus on technical education, skills and training in MOD’s strategic approach to prosperity, including when talking with potential investment partners;
  • The MOD and its key suppliers should develop a common approach and format for collecting data, preferably based on a digital solution, to underpin new guidance and metrics on key prosperity factors;
  • MOD should increase agility and pace in defence procurement, adopting a culture more focused on finding the right procurement solutions and less on defining and avoiding obstacles at the outset;
  • In specialist sectors such as space and cyber, the armed forces should consider facilitating whole career flexibility with secondments across Defence, including in industry, at point sduring careers to remove barriers and retain skills;
  • MOD should adopt open architecture across the Defence spectrum; and
  • MOD to consider whether its commitment to spend 1.2% of the defence budget of S&T is sufficient following the Government Industrial Strategy target to raise total UK R&D investment to 2.4% of GDP by 2027.

The full report and list of recommendations can be accessed here.

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