Speaking on Friday ahead of the publication of independent analysis produced by Oxford Economics on behalf of BAE Systems – [BAE Systems Contribution to the UK Economy]- Minister of State for Defence Procurement Jeremy Quin, whose responsibilities include the Defence Equipment Plan, relations with the defence industry, defence supply chain, nuclear enterprise, defence exports, defence science and technology, innovation and defence estates and infrastructure remarked “that In every region of the UK, defence is driving prosperity, protecting the economy, providing jobs and building skills” and that “BAE Systems is a leading light in that progress, helping us level up the country by supporting tens of thousands of jobs”.
Making reference to the Defence & Industrial Strategy (DSIS) that was published in March last year, Mr. Quin emphasised strongly that the government was determined to build trust and deepen the relationship between government, industry and academia in order to bolster British innovation.
Furthermore, he promised greater insights and that as part of DSIS and the overall Defence Equipment Plan the government had had committed a sharply increased level £6.6bn to research and development. Rightly, he also emphasised the crucial value of the UK supply chain in government thinking and planning along with the determination [of government] to help SME’s along with social values of defence and of how important all this was in an increasingly complex threat environment.
Listening to a Government Minister who, in my view and that of some others within industry, is not only on top of his brief but also one who has already proved that he is determined to effect change within Defence Headquarters [MOD], is extremely refreshing. And having observed some of the promises made by Mr. Quin has said since he took over the role of MinDP in February 2020 I have been impressed in how he has shown himself to open and honest in terms of communicating on issues of concern without hiding detail, his understanding of the many problems that need to be dealt with and improved and his genuine enthusiasm to get on with the job of building more UK prosperity through UK defence.
Mr. Quin’s reassurances in respect of determination to build relationships with industry and as one who very much appears to genuinely understand the importance of maintaining and building sovereign UK defence capability are extremely welcome. Actions speak louder than words of course but I am in little doubt that as MinDP he is clearly determined to play a part in transforming UK defence and through innovation, science and technology and investment and is determined to succeed.
The ‘BAE Systems Contribution to the UK Economy’ analysis from Oxford Economics which I have read in detail over this past weekend makes fascinating reading. The main points may be summarised as:
BAE Systems contributed £10.1 billion to the UK’s GDP in 2020, contributing a total of £350 for every £100 supported across the UK’s economy
The company exported £3.9bn of goods and services, equivalent to 0.7% of UK exports that year and contributed £2 billion to the UK’s balance of payments
And supported 143,000 full time jobs across the UK including 35,300 at BAE Systems itself. Of these 72% of employees work in engineering roles
And in 2020 the company spent £3.8 billion with 5,000 UK suppliers, supporting nearly 60,000 jobs and made a total tax contribution of £2.7 billion including more than £700 million paid directly by the Company
In the same year BAE Systems invested £1.1 billion in technology, research and development on behalf of customers and was also highly productive with each employee contributing £83,000 to the UK economy – a figure that is according to Oxford Economics, 29% higher than the national average.
In order to ensure a robust pipeline of talent for the future, the Company invested £93 million in skills, training and development activities in 2020. That figure included more than 2,000 apprentices and nearly 600 graduates in training across a wide range of roles from electronics and electrical, structural, software and research engineers, to manufacturing, operations and project management. Continuing its support for young people, BAE Systems will this year (2022) recruit almost 1,700 apprentices and graduates across the country – 25% up on last year and the largest intake it has offered in a single year.
Importantly, the report shows how BAE Systems has supported deprived areas – employing 14,700 full-time workers and spending £700 million with supplier companies in the bottom fifth of the government’s Indices for Deprivation for each of England, Scotland and Wales in 2020.
Speaking following the report publication, Charles Woodburn, BAE Systems Chief Executive, said: “Our sector not only supports our national defence and security, but also provides unparalleled economic value which drives the UK’s prosperity. The investment we make in highly skilled jobs, research & development and our extensive supply chain supports thousands of companies and tens of thousands of people and the communities in which they live.”
While BAE Systems has large scale global operations spread across the US, Europe, the Middle East, Asia and Australia, total revenues of £21bn in 2020 and a global workforce of 89,600 workers, that the company accounts for £3.9bn of UK defence exports, a figure that represents 0.7% of total UK exports, demonstrates how important the company remains in respect of UK defence, the economy and also in respect of UK sovereign defence manufacturing capability.
In his forward to the Oxford Economics report BAE Chairman, Sir Roger Carr, emphasised how because of its focus on performance and the significant contribution it makes to the economies and societies in which the company operates BAE Systems “takes its role as a technology leader seriously investing some £11 million in emerging technologies both directly and on behalf of the UK government.
The company” Sir Roger said “also manages important research and development partnerships with UK Universities [Birmingham University along with Manchester, Nottingham, Southampton and Strathclyde Universities] which focus on strategically important technology areas for our business including artificial intelligence, autonomy and advanced manufacturing”. I would add the emphasis the company places of operating responsibly and sustainably and that it has set itself a target to achieve net zero greenhouse gas emissions across its by 2030 operations.
The Government has set a target to raise exports as a percentage of GDP to 35% by 2030 – a figure that translates to £1 trillion per annum. Leaving the Covid impacted figure for 2020 aside, the achieved figure for 2019 was 31.7%. This is undoubtedly a formidable target and contrasts with an approximate 43% already achieved by Germany. But with a can-do/will-do approach and with proper incentives and motivation from government, achieving such a figure is certainly possible. As the UK’s largest defence company BAE Systems and one that is already achieving significant increases in exports whilst at the same time doing whatever it can to support its supply chain and many SME’s through mentoring and other supportive means, the company is more than doing its bit to help government achieve such a target.
The company is also very prominent in respect of what it doing in respect of skills training and retention and will this year take on record levels of graduate trainees and apprentices.
BAE Systems has long been engaged in the space sector, of how it is developing radio-technology to provide global satellite navigation systems and command and control services from low earth orbit satellites the importance of this being highlighted in the report that the loss of just one satellite for 5 days could potentially be a cost the UK economy £5.2 billion. Space is growing in respect of business activity and the government is being hugely supportive in ensuring that the UK will be one of the leading countries in this field. To that end, in addition to existing activities such as the collaboration with Goonhilly Down Earth Station, a large radio-communications operation in Cornwall, it is worth noting that BAE Systems recently acquired In-Space missions, a Hampshire based SME that designs and operates satellites.
Spread across the central belt of Scotland where the company is engaged on manufacturing Type 26 ships for the Royal Navy, in Lancashire where at Warton and Samlesbury where at the latter it manufactures large components for the F-35 Joint Strike Fighter and at both plants support it major workshare in the Eurofighter Typhoon and Future Combat Air System, in Barrow-in-Furness where the company produces Astute class submarines and the future Dreadnought-class ballistic missile submarines, Portsmouth Naval base where it upgrades and maintains Royal Navy ships, or on other regions such as Rochester, Kent electronic systems and engineering or spread around the country as they are, munition equipment and at various Royal Air Force and Royal Navy bases where it supports crucial elements of air and maritime defence, BAE Systems is doing its bit for Britain, for the MOD and for exports.
When it comes to education, skills, technology and sustainability BAE Systems is well prepared for the future, determined to support national objectives set by government and work with them, invest in its future and in its workforce and be a responsible employer. The record of achievement so far is formidable and the future looks bright.
CHW (London – 17th January 2022)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785