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  • Writer's picturePratiksha Saha

How Will Military Divestment Affect Regional Economies in the UK?

The defence sector as a whole in the UK is a very important industry, aptly put in a government paper:

Defence plays a special role in the UK economy for several reasons. It is a strong contributor to the manufacturing base, employing directly more than 140,000 people and providing places for 4,300 apprentices. It is an important export sector, with exports averaging £7.7 billion in 2010-14 (ADS, 2016). Moreover, it is strategically important for national security (HMG & DGP, 2014)

A 2002 paper looked at the economic cost and benefits of this export sector. It looked at the effect of a 50% cut in defence exports. It suggested that these exports are of little importance to the UK economy and a halving of them would have relatively little impact on government finance. However the more significant effect argued was the defence industry having significant outlays in R&D – 15% of total outlays. Therefore a reduction in the size of the defence sector would affect the future productive capacity of the UK economy. There would be fewer spin off technologies which can be applied to civilian products, such as GPS, EpiPen and duct tape. This would, and is argued, outweigh any effect of crowding out by the large amount of government spending in the sector.

Finally it is worth noting that whilst the defence sector does produce a large amount of goods for the export market £7Bn it is the domestic market that firmly outweighs that with the MOD’s annual budget of £34bn.

Click on the link below to read the full paper.

Eprg – How will military divestment affect uk regional economiesBehavioural Economics How
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