Research and analysis

Finance and economics annual statistical bulletin: international defence 2019

Published 10 September 2019

The Finance & Economics Statistical Bulletin series provides figures on the composition and scope of the Department’s expenditure, information on the impact of defence spending on the wider economy, and compares Ministry of Defence (MOD) spending to that of other departments and countries.

International Defence presents comparative information on UK defence spending and that of other countries. This includes the defence expenditure of NATO member states in constant US$ and as a percentage of their GDP and how much of their defence expenditure is spent on equipment. A comparison of two international defence spending data sources, the Stockholm International Peace Research Institute (SIPRI) and the International Institute for Strategic Studies (IISS), is provided, focusing on top spenders. Also detailed are the top 10 military spenders worldwide, ranked using market exchange rates (MER) and purchasing power parity (PPP) rates. Trends for the UK, Germany, France and the USA are given particular focus at the end of the bulletin.

1. Key Points and Trends

$970bn	Total military expenditure of NATO members.
	An increase of $27 billion since 2017, of which the USA accounted for $16 billion.
6	NATO countries meeting the guideline to spend 2% of GDP on defence.
	These countries are the USA, Greece, the UK, Poland, Latvia and Estonia. The UK remains the 2nd largest spender in NATO, after the USA.
2.1%	UK expenditure on defence as a percentage of national GDP in 2018.
	The UK has met NATO’s 2% target every year since its introduction in 2006.
6th	The UK’s position in global defence expenditure rankings, according to IISS.
	SIPRI, who include expenditure on state paramilitary forces in their estimates, rank the UK 7th globally.
$1,822bn	Total worldwide military expenditure in 2018, as estimated by SIPRI.
	The USA was the world’s largest spender, accounting for 36% of the total global spending.

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2. Introduction

This bulletin provides information on defence spending by NATO member states, top military spenders globally, as well as trends in defence spending and strategic posture for the UK, USA, France and Germany. It is produced as part of the transparency and accountability of the Ministry of Defence to Parliament and the public. Detailed statistics and historic time series can be found in the supporting data tables.

2.1 Context

The information in this bulletin has a wide range of users including the media, politicians, academic researchers and the general public who use the information to:

• Set the context for other information on Defence;
• Assist in understanding the impact of changes in Defence policy;
• Make comparisons of countries’ defence spending both over time and against other countries;
• Help assess the relative position of the UK’s defence expenditure in terms of other NATO members, and globally.

This bulletin is not an Official Statistics publication

The United Kingdom Statistics Authority can designate statistics as National Statistics, in accordance with the Statistics and Registration Service Act 2007 and signifying compliance with the Code of Practice for Official Statistics.

Designation can be broadly interpreted to mean that the statistics:

• meet identified user needs;
• are well explained and readily accessible;
• are produced according to sound methods; and
• are managed impartially and objectively in the public interest.

However, as the statistics contained within this bulletin have already been published by either NATO, SIPRI or IISS, they are not being published as Official Statistics.

Further information about the limitations of International Defence data can be found in the Methodology section, and the sources of the information contained within the bulletin can be found referenced within the tables and in the footnotes.

3. NATO Countries’ Defence Expenditure 2018

USA outspends the rest of NATO combined by more than double for seventh year running.

Figure 1 shows defence expenditure of NATO members during 2018 in US$ billion. The USA is shown on the left of the chart, with the rest of NATO shown on the right. Countries that spent more than $20 billion on defence are listed separately and all other NATO countries are grouped together.

The USA has spent more than twice as much on defence than the rest of NATO combined in each of the last seven years. In 2012 the USA spent over $500 billion more than the rest of NATO. However, this gap has been decreasing every year and it now stands at $375 billion. Their expenditure of $672 billion in 2018 represents 3.3% of their GDP. For the last seven years, the UK has been the second highest spender in NATO, spending $60.4 billion on defence in 2018.

Figure 1: NATO countries defence expenditure (current 2018 prices and exchange rate (US$)), 2018^{[footnote 1]}

4. NATO Countries’ Defence Expenditure 2012-2018

Total NATO expenditure falls from 2012 high despite increase in NATO Europe spending.

Between 2012 and 2018 total NATO defence spending has fallen by $72.2 billion. While NATO Europe have increased spending by over $25 billion in this period, NATO North America have reduced their expenditure by nearly $100 billion.

In North America, Canada has increased spending between 2012 and 2018 but the USA has decreased their spending by 13% in the same period. NATO expenditure is heavily influenced by the USA who accounted for 69% of the total in 2018.

NATO Europe has shown a continued increase in defence expenditure since 2015 with their biggest year on year growth coming between 2017 and 2018. During this period they increased their spending by $13.1 billion. Turkey was the largest contributor to this, spending an additional $2.8 billion in 2018. Much of Turkey’s recent activity has focused on internal security and cross-border operations in response to the continuing war in Syria.

Figure 2: NATO defence expenditure 2012-2018 (2018 prices and exchange rate (US$))^{[footnote 2][footnote 3]}

The UK, France and Germany continue to contribute to growth in NATO Europe defence spending.

The chart below shows how the defence spending of NATO Europe countries changed between 2012 and 2018, in the context of their overall 2018 expenditure. While some European countries showed significant percentage growth, they have generally been the countries with a low level of defence expenditure. To demonstrate this, the UK showed a 1.9% increase between 2012 and 2018 which translates to an extra $6.5 billion. Meanwhile, Lithuania’s 46% increase during the same period only represents $0.95 billion.

This is why, despite some significant changes in spending patterns at a national level, the European total only increased slightly over this period.

Figure 3: Average % change in real defence spending of NATO Europe countries, 2012-2018^{[footnote 2][footnote 3]}

5. NATO Countries’ Defence Expenditure as a Percentage of GDP

The UK, USA and Greece are the only countries to have met the NATO target every year since 2012.

NATO sets a guideline for its members to spend at least 2% of national GDP on defence annually. In 2018 the UK was one of only six NATO members to meet this guideline; the other countries being the USA, Greece, Poland, Latvia and Estonia.

Despite Greece being only the 12th highest defence spender, their lower GDP in comparison to other NATO countries places them second in the chart below. Greece’s 2014 National Military Strategy identifies the country’s principal defence objectives as safeguarding sovereignty and territorial integrity. The armed forces would also be expected to support Cyprus in the event of a conflict.

Three member states spent less than 1% of GDP on defence in 2018; these were Spain, Belgium and Luxembourg. Luxembourg consistently spends the lowest percentage of GDP on defence, averaging just over 0.4% from 2012 through to 2018.

Figure 4: NATO countries’ defence expenditure as a percentage of GDP (2015 prices), 2018^{[footnote 4]}

6. NATO Countries’ Equipment Expenditure

The UK meets NATO target for sixth year running.

NATO sets a guideline that its members should spend at least 20% of their defence budget on equipment. In 2018, the UK was one of fourteen countries to meet this target, spending 24.2% of its defence expenditure on equipment. Interestingly, the country with the largest proportion of their defence expenditure spent on equipment, Luxembourg at 41.8%, also had the smallest spend on defence as a proportion of GDP.

France, Turkey and the USA are the only countries to have consistently met this target since 2012.

Figure 5: NATO countries’ equipment expenditure as a percentage of defence expenditure 2018^{[footnote 4]}

7. SIPRI and IISS Defence Expenditure Rankings

Major defence sources continue to disagree on level of China’s defence spending.

Comparisons of international defence expenditure are challenging due to the varying definitions of defence expenditure employed by the different organisations which publish estimates.

Some widely used estimates of global defence spending are produced by the Stockholm International Peace Research Institute (SIPRI) and the International Institute for Strategic Studies (IISS). However, estimates and global rankings differ even between these sources, as can be seen in Figure 6.

Figure 6: Estimates of total defence spending, 2018 (US$)

China, whose armed forces remains the largest in the world, has significantly different estimates between the sources. This is to be expected due to the absence of reliable, openly available figures for Chinese defence expenditure.

The $10.4 billion difference for France is due to differing definitions of defence expenditure: SIPRI includes spending on the non-deployable elements of the French Gendarmerie police force as defence expenditure, whereas IISS (and NATO) do not. This is a consequential difference, as the inclusion or exclusion of expenditure on the Gendarmerie affects whether the UK is considered the sixth or seventh largest global spender on defence.

8. Worldwide Military Expenditure 2018

NATO members continue to outspend Non-NATO members.

SIPRI provides global estimates of defence spending which are displayed as a proportion of total global spending below. Global military expenditure in 2018 was estimated by SIPRI to be $1,822 billion, an increase of $83 billion in nominal terms since 2017. Spending by NATO members made up 53% of all global military expenditure.

Figure 7: Global military expenditure based on Market Exchange Rates (MER), 2018^{[footnote 5][footnote 6]}

The USA remained the largest spender in 2018, accounting for more than the next seven largest spenders combined and making up 36% of total global military expenditure.

This year India overtook Russia to be the third largest Non-NATO defence spender with $66.5 billion leaving it only $1 billion behind Saudi Arabia in second.

SIPRI has not published figures for the UAE for the last four years. Based on the last recorded figure in 2014 they would have been in the top 20 highest spenders shown above.

9. Focus on NATO Allies 1980-2018

The following charts present a range of defence comparators for the UK, USA, France and Germany since 1980. These nations have been selected on the basis that they either have similar strategic postures, capabilities or force structures to the UK, or that the relative size of their respective defence budgets are comparable. Definitions of defence expenditure have changed over time and differ between countries; this makes detailed comparisons between countries difficult. Considering this fact, data should only be used as an indication of trends and not as a definitive time series.

From 2009 French defence expenditure excludes the Gendarmerie which is now financed separately by the Ministry of the Interior. This change more accurately reflects the NATO definition for defence expenditure, but has led to lower levels of defence spending, both in total and as a percentage of GDP.

9.1 Percentage of GDP

Expenditure of allies falls since peak spending during the Cold War.

Defence spending as a percentage of GDP began decreasing for all four nations in the early to mid-1980s as the Cold War drew to a close. This decrease continued throughout the 1990s after the end of the Cold War, with a brief increase in the UK and USA as a result of the first Gulf War. This decrease ended in the early 2000s because of military activity in Iraq and Afghanistan.

Whilst spending as a percentage of GDP has remained relatively stable since 2000 in the UK, Germany and France, USA defence spending as a percentage of GDP rose sharply as a result of military activity in the Middle East, peaking at over 5% of GDP in 2009, before falling rapidly to its current level of 3.3%.

Figure 8: Defence spending as a % of GDP (current prices), 1980-2018

9.2 Spending per Person

USA spending per person fluctuates amid allies’ stability.

Spending per person was relatively stable throughout the 1980s for each of the countries considered except the USA, whose spending increased during the first half of the decade, and then decreased during the latter. Spending per person for all countries decreased during the 1990s, except for a brief USA and UK upturn as a result of the first Gulf War.

The second major increase in USA spending per person was largely associated with the second Iraq war and the International Security Assistance Force (ISAF) contribution in Afghanistan. German spending per person dropped sharply in 1991, coinciding with reunification following the end of the Cold War.

Figure 9: Real Defence spending per person (constant 2018 prices), 1980-2018^{[footnote 7]}

9.3 Military Personnel by Population

Military personnel numbers relative to population remains constant for last four years despite overall decrease since 1980.

All four countries have seen a gradual decrease in the number of military personnel as a proportion of the total population since 1980. For all countries apart from Germany, these numbers were highest in the early 1980s. German estimates peaked in 1990, coinciding with reunification following the end of the Cold War, before undergoing a rapid decrease because of restrictions on the size of Germany’s military, a condition of reunification^{[footnote 9]}.

Interestingly, while USA spending per person increased substantially between 1999 and 2009 their personnel per thousand population actually decreased during this period showing that this money was more likely spent on resources other than personnel.

Figure 10: Number of military personnel per thousand population, 1980-2018^{[footnote 10]}

As previously mentioned, 2009 saw the removal of Gendarmerie expenditure and personnel from the French military budget. This explains the dramatic decrease in French personnel per thousand population at this time. Germany saw a similar, but much smaller, decrease after 2010 because of the abolition of conscription.

The UK saw a decrease in the number of military personnel per thousand population in 2014. One year later the UK’s Ministry of Defence launched the Strategic Defence and Security Review (SDSR) 2015 which outlines how the UK intends to continue recruiting and retaining their armed forces personnel.

9.4 Spending per Service Person

Spending per service person rises as allies reduce personnel numbers.

Military expenditure per service person was relatively consistent from 1980 to 2000 for all four nations (the USA and UK only undergoing very gradual increases). Since 2000 all four countries have increased their spending per service person. This increase has been relatively gradual in Germany and France; spurred on by the end of conscription in the former and the reclassification of the Gendarmerie in the latter.

The UK has increased spending per service person by $125,000 between 2012 and 2018. However, this is largely due to a decrease of 40,000 military personnel in the same period. This is a similar explanation for France and Germany’s increase during these years.

Figure 11: Real defence spending per service person, 1980-2018^{[footnote 11]}

While the USA have reduced their number of military personnel since 2010, their expenditure has fallen at a faster rate resulting in a decrease in spending per service person during this period. Interestingly, their spending per service person started decreasing during the Afghanistan/Iraq conflicts. This is likely due to the conflicts drawing to a close a few years later in 2014.

10. Methodology

10.1 Data Quality

This short section on methodology sets out some simple processes and methods used in the compilation of some of the tables and charts used in this bulletin. More detailed explanations of the data sources and methodologies used can be found in the related data tables and Background Quality Reports.

10.2 Sources of International Defence Data

International Defence Statistics are available in a variety of publications and on a substantial number of websites. The UK Ministry of Defence has no control over the quality, reliability and coverage of data contained within these sources and does not endorse any specific output.

Data provided in this publication fall outside the scope of National Statistics and Official Statistics and as such, must be regarded as illustrative only.

10.3 Limitations of International Defence Data

Making international comparisons of defence presents a number of widely documented issues relating to the comparability and granularity of the international source data. Making direct comparisons will never be straightforward because:

• Defence expenditure data are merely input measures which give them only limited usefulness as an indicator of military strength, capability or burden.
• Whilst there are standardised definitions of defence spending and accounting conventions used by international organisations, principally the UN and NATO, not all countries record and publish their defence spending in accordance with such definitions and conventions.
• Some countries’ actual defence expenditure may be very different from their budgeted expenditure.
• Differences in national tax regimes and the treatment of pension contributions can lead to significant distortions in expenditure.
• Departments other than defence departments may be deemed to contribute to defence whilst some spending by defence departments can be categorised as supporting other activities.
• The choice of conversion method, Market Exchange Rates (MER) or Purchasing Power Parity (PPP), used to convert to a common currency or from current to constant prices can result in significantly different rankings of global defence. Using MER, the price at which two currencies can be exchanged on the foreign exchange markets, tends to undervalue the currency and hence the scale of expenditure of lower income countries. Attempts are often made to circumvent this problem using PPP rates; an index of how much a certain bundle of goods costs in one country relative to another. These use currency conversion rates which equalise the overall price of a bundle of goods and services in each country. However, PPP rates can be highly inaccurate because of the difficulty of allowing for differences in quality and devising appropriate and relevant “weighting” of individual goods and services. Civilian based PPPs may also not be representative of defence goods and services. For these reasons, the figures in this bulletin are based on MER rather than PPP. See data tables for a comparison of the top ten largest defence spenders by MER and PPP.

While these problems are less significant in relation to the comparison of defence spending between NATO members, they are substantial in relation to global comparisons.

10.4 Note on NATO definition

NATO publishes an annual compendium of financial, personnel and economic data for all member countries. The NATO definition of defence expenditure differs from national definitions so the figures quoted may diverge considerably from those presented in national budgets. More information relating to the revised NATO definition can be found on the NATO website.

10.5 NATO Expenditure – Constant Prices and Exchange Rates

All estimates comparing trends over time are based on constant 2018 prices and, as far as possible, constant 2018 exchange rates.

The deflators used to convert current price totals into 2018 constant figures were inferred from the NATO release using the current price estimates and the constant 2015 price estimates. Exchange rates are inferred from US$ and local currency totals reported in the NATO press release.

The exchange rates inferred in the above manner are used for all countries except Latvia between 2012 and 2013 and Lithuania between 2012 and 2014. This is because both of these countries moved from their national currencies to the Euro (in 2014 and 2015 respectively), so 2018 exchange rates for their previous currencies are not available. In both cases, figures in non-Euro local currencies were estimated using the most recently available exchange rate. In Latvia’s case this was for 2013 and for all of Lithuania’s estimates before 2015 this was 2014. These rates were inferred in the same manner as set out above for other rates.

The estimates presented in Figure 2 are the sums of the national totals calculated as above.

11. Glossary

Constant Prices (Real Values) are price values expressed in the currency value of a particular period (usually a single year). Typically used when comparing spending across a time series, in order to ensure that any changes are due to actual changes in expenditure, rather than factors such as shifts in currency value/inflation.

Current Prices (Outturn Prices) are the prices of the period when the expenditure actually occurred.

Gendarmerie (National) is one of the two national police forces of France along with the National Police. It is a branch of the French Armed Forces placed under the jurisdiction of the Ministry of the Interior with additional duties to the Ministry of Defence.

Gross Domestic Product (GDP) (at market prices) is the value of goods and services produced within a country’s borders in a year. Economic data are often quoted as a percentage of GDP to give an indication of trends through time and to make international comparisons easier.

Gross Domestic Product Deflator is an implicit price deflator for the Gross Domestic Product and is derived by dividing the estimate of GDP at current prices by the estimate of GDP at constant prices. The GDP Deflator is commonly used as a measure of inflation in the economy for the country to which it refers.

IISS stands for the International Institute for Strategic Studies, which is a global think tank that researches political and military conflict.

Market Exchange Rate (MER) is a currency exchange rate determined largely by market forces.

Ministry of Defence (MOD) is the United Kingdom Government Department responsible for implementation of Government defence policy and is the headquarters of the British Armed Forces. The principal objective of the MOD is to defend the United Kingdom and its interests. The MOD also manages day to day running of the armed forces, contingency planning and defence procurement.

NATO stands for North Atlantic Treaty Organisation. An alliance whose purpose is to guarantee the freedom and security of its members through political and military means.

Nominal Terms is a year on year comparison of current prices, not adjusted for the effects of inflation.

Purchasing Power Parity (PPP) is a method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services. Because goods and services may cost more in one country than in another, PPP allows us to make more accurate comparisons of standards of living across countries. The estimates use price comparisons of comparable items but since not all items can be matched exactly across countries and time, the estimates are not always “robust.”

SIPRI stands for the Stockholm International Peace Research Institute, which is an international institute that researches conflict, armaments, arms control and disarmament.

12. Further Information

12.1 Rounding

Where rounding has been used, totals and sub-totals have been rounded separately and so may not equal the sums of their rounded parts.

12.2 Revisions

Corrections to the published statistics will be made if errors are found, or if figures change as a result of improvements to methodology or changes to definitions. When making corrections, we will follow the Ministry of Defence Statistics Revisions and Corrections Policy. All corrected figures will be identified by the symbol “r”, and an explanation will be given of the reason for and size of the revision. Corrections which would have a significant impact on the utility of the statistics will be corrected as soon as possible, by reissuing the publication. Minor errors will also be corrected, but for convenience these corrections may be timed to coincide with the next annual release of the publication.

12.3 Contact Us

Defence Statistics welcomes feedback on our statistical products. If you have any comments or questions about this publication or about our statistics in general, you can contact us as follows:

12.4 Defence Statistics (Defence Expenditure Analysis)

Telephone: 030 679 84442

Email: [email protected]

If you require information which is not available within this or other available publications, you may wish to submit a Request for Information under the Freedom of Information Act 2000 to the Ministry of Defence via the following link:

https://www.gov.uk/make-a-freedom-of-information-request/the-freedom-of-information-act

12.5 If you wish to correspond by mail, our postal address is:

Defence Statistics (Defence Expenditure Analysis)
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For general MOD enquiries, please call: 020 7218 9000

1. Figures for 2018 are provided as estimates. ↩

2. In 2014, Latvia joined the Euro and therefore expenditure figures prior to this, which were measured in its national currency, have been converted by Defence Statistics using the inferred Exchange Rate for Latvia in 2013. ↩ ↩²

3. In 2015, Lithuania joined the Euro and therefore expenditure figures prior to this, which were measured in its national currency, have been converted by Defence Statistics using the inferred Exchange Rate for Lithuania in 2014. ↩ ↩²

4. Iceland is a member of the Alliance but has no armed forces. ↩ ↩²

5. The figures on this page have been calculated using SIPRI definitions of defence expenditure and therefore may differ from information based on the NATO or IISS definition. ↩

6. The top 20 global defence spenders are charted individually; all other countries’ expenditure is represented in the ‘other’ groupings. ↩

7. Historic spending per person calculations in this chart differ from those shown in the 2017 chart due to exchange rate variations that have occurred since 2017 and because of revisions to population figures in the IMF World Economic Outlook Database. ↩

8. The Treaty on the Final Settlement with Respect to Germany. Relevant section is Article 3, paragraph 2. ↩

9. Historic figures in this chart may differ slightly from those shown in the 2017 table due to revisions to population figures in the IMF World Economic Outlook Database and updates to NATO military personnel figures. ↩

10. Historic spending per Service person calculations in this chart differ from those shown in the 2017 chart due to exchange rate variations that have occurred since 2017 and revisions to NATO military personnel figures. ↩