18 Nov 2019 - By
By

What does the UK spend on Defence?

*All information in this blog is based on data from before the start of the General Election campaign

DCI specialises in helping businesses find and win defence contracts. How we do this largely depends on the wealth of opportunities out there in the defence market. We can track and predict potential areas of growth by measuring how much the UK government and others spend in different areas of the defence sector and get a taste of the projects in the pipeline that will shape our future. The UK Spending Round announced by Chancellor of the Exchequer Sajid Javid on 4 September 2019 gives us an indication of the trends that we might expect in defence over the next five years, depending on the General Election results.

Although the Spending Round itself had limited media coverage, given the noise of Brexit and growing environmental concerns across the globe, the Spending Round of September 2019 marked the most significant real-terms growth in defence spending since the 1980s. It sets the scene for an exciting time for the defence industry, with planned defence and security advancements ranging from infrastructure projects to personnel training to cyber security.

We discuss the government funding highlights in further detail below and how DCI can support your organisation to win defence tenders.

Spending Round highlights for Defence

The Spending Round of September 2019 showed a significant increase in fortunes for the Ministry of Defence (MOD), continuing the trend of the past two years. The Spending Round marked the largest four-year real-terms increase government spending in the defence sector since the early 1980s. This trend is set to continue for some years to come, with the UK set to become the second biggest defence spender in Europe after Greece.

The Spending Round announced increased spending on the UK’s world class Armed Forces. In particular, £2.2 billion in additional funding was made available for the Armed Forces to ensure they meet the ever-changing threats to national security by increasing recruitment and training for soldiers across the UK. This sum ensures the UK will continue to exceed its commitment to grow the defence budget by 0.5% in real terms, simultaneously exceeding its NATO target of spending 2% of GDP on defence each year.

Other areas covered by the Spending Round covered included the police. Additional funding of £750 million was announced to recruit 20,000 more police officers in forces in England and Wales, including specially trained armed police officers. This increase was part of the most generous settlement the Home Office has received in the last 15 years, with a 6.3% increase in real terms.

The increase in government funding for both the Armed Forces and the police mean there could be an increase in the number of defence tenders and blue light tenders, with opportunities for organisations to win business across the defence sector, from construction projects to intelligent technology implementation. Recruitment to the police and the Armed Forces is expected to begin immediately, and is likely to result in an increase in the volume of defence tenders in areas such as training equipment, uniform suppliers and property development.

How the UK defence spending compares to other countries

According to the UK Defence Journal, the UK is among the top four defence spenders in NATO by share of GDP with the others being the United States, Greece and Estonia. Estonia and the UK both spend 2.13% of their GDP on defence, while Greece spends 2.24% and the USA spends by far the most – 3.42%. NATO’s minimum requirement defence spend is 2% of GDP. The USA dwarfs its allies with a larger population and larger budget, spending £604 billion ($730 billion) a year on defence, compared with the UK’s £50 billion a year. China is the second largest spender in the world, increasing its defence spending to £207 billion in 2018.

However, it is worth noting that it is to the UK’s credit that the country has been able to stabilise its position as the second highest spender in defence in Europe, and the third overall in NATO. With a comparatively limited budget compared to the USA, the UK has managed to maintain a relatively broad spectrum of capability within the defence sector and overall political influence, and there is no sign that it is on course to lose this position within NATO.

Where the UK defence budget goes

There are three main areas where defence spend is distributed. The biggest spending is on service personnel, followed by equipment support and then specialist military equipment. Other spending areas, at a smaller scale, include infrastructure and property and other equipment. The breakdown of UK defence expenditure in 2017/2018 is as follows:

  • Service personnel – 26.5%
  • Equipment support – 18.7%
  • Specialist military equipment – 15.6%
  • Infrastructure – 11.2%
  • Property and other equipment – 8.1%

The MOD funds the Army, Navy and Air Force, as well as civilian personnel, making it inevitable that personnel costs are the MOD’s largest area of expenditure. MOD service personnel are deployed across the world in missions in Iraq and Syria as well as with NATO in Estonia, Poland, Hungary, Bulgaria and Romania.

The MOD also supplies peacekeeping troops and equipment in a number of African countries, including Mali, South Sudan, Somalia and Nigeria. British troops are stationed in various missions not only across the world, but also closer to home. Hundreds of personnel were called in to respond to the attempted tube bombing in Parsons Green station, the Salisbury chemical attack and the bombing in Manchester Arena, and troops are often deployed for civil emergencies such as flooding.

The MoD is the UK’s single largest customer

Although the quick assumption to make would be that the defence industry spends a lot of money, it is hugely important to note that it also brings in a great deal of money too. The UK defence sector is the second largest defence exporter in the world, supporting hundreds of thousands of jobs and livelihoods in the UK and overseas. The MOD itself is the UK industry’s single largest customer. The procurement opportunities in defence for businesses of all sizes are massive, and this point cannot be overstated. If your organisation wishes to develop and grow in this industry, the time to win defence tenders is certainly now, as the industry potentially moves into its best funded decade for over thirty years.

How DCI can help you win defence tenders

DCI publishes thousands of contracts every day which are out there, waiting to be won. We support defence and security organisations to procure the goods and services they require. With the implementation of our powerful business intelligence tools, including tender alerts, market analysis and bespoke insight on your competitors, we work hard to give you the best chance of success winning these defence tenders. We summarise how we do this in three areas below.

Intelligence

The DCI team is constantly searching for new business opportunities with the UK MOD, but also in the wider procurement market across the UK and overseas. We combine these opportunities into a huge online database, updated daily, where we publish defence tender opportunities that are UK specific as well as global, depending on which geographical area your business wants to grow in.

Powerful tools

DCI provides users with easy-to-use business intelligence tools to ensure effective and efficient procurement solutions. Depending on the DCI package your organisation chooses, you can access a number of featured tools which work to increase your chances of success by enabling you to implement early engagement strategies, undertake competitor analysis, as well as providing critical insight reports on current UK spending and tender management, all in one accessible system.

Market Engagement

Use DCI to uncover leads and grow your business pipeline with innovative features like Market Leads and Spend Analysis. Your organisation will also be given free tickets to attend leading defence procurement events such as DPRTE, engaging with procurement specialists face to face and establishing networking relationships.

Start your DCI free trial today

 

 

Want to get in touch? Our sales and customer account teams are on hand to support and working remotely in line with our Business Continuity Plan. At this time, the quickest way to get in touch is via live chat or email - please visit our Contact page for the details.