Supporting government to better leverage economic gains from defence expenditure

At just over 10% of public expenditure and with a decade-long defence equipment budget of £238 billion, defence involves UK government spending on a massive scale. This expenditure could produce very significant economic and strategic benefits, but a variety of policy decisions have prevented the British government from reaping these benefits. King’s research has played a critical role in identifying how the UK can reap the wider economic and strategic benefits of defence expenditure.

During the planning and writing of the 2015 Strategic Defence and Security Review (SDSR), Professors Andrew Dorman and Matt Uttley from the Defence Studies Department, and Dr Benedict Wilkson, former Director of Research at the Policy Institute, King’s College London, used their extensive knowledge and understanding to conduct work on the economics of defence spending, with a view to informing policymakers and influencing changes to the SDSR.

The research involved synthesising material relating to the UK defence industry and defence acquisition and conducting interviews with government officials and industry representatives, in order to better understand published official and non-official statistics behind defence expenditure. The researchers then identified key recommendations for policy aimed at improving the profitability of defence spending.

Key findings from the research showed the major economic and employment advantages from defence, which were not being realised by the UK government. They also showed that a further £100 million spent on defence could generate £230 million in the wider UK economy, meaning that defence expenditure could be as profitable as other innovative and high-technology industrial sectors, such as pharmaceuticals. Lastly, they highlighted the lack of rigorous data and analysis needed to underpin valid and rational decisions in government spending reviews, thereby making it hard to assess taxpayer value for money.

Their research has influenced policy and debate. This includes the creation of the new National Security Objective 3, “to promote UK prosperity”, meaning these wider economic benefits are now factored into all major defence procurement decisions. A refreshed defence industrial policy was developed which now includes a different “value for money” definition on which all defence procurements are based. The Joint Economic Data Hub (JEDHub) was also created to capture more defence economic statistics in order to identify the net economic benefits and costs of defence industrial activity.

In addition, in March 2020 King’s hosted an international Defence Economics Conference where the Minister for Defence Procurement launched a cross-government review of the UK's Defence and Security Industrial Strategy. Wilkinson, Uttley and Dorman were asked to contribute a major analysis of UK expenditure on defence research and development, leading to a number of further recommendations to increase investment in defence R&D, and ensure the UK remains at the forefront of defence capability development and a technologically attractive collaborative partner.

As a result of their research, UK Government policy on defence procurement has been changed by improving awareness and enriching understanding about the importance of leveraging defence expenditure for its wider economic and employment benefits.