Research and analysis

Finance and economics annual statistical bulletin: international defence 2020

Published 17 December 2020

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.

Key Points and Trends

$1,032bn	Total military expenditure of NATO members.
	An increase of $75 billion since 2018 when adjusted for inflation, of which the USA accounted for nearly $64 billion.
8	NATO countries meeting the guideline to spend 2% of GDP on defence.
	These countries are the USA, Bulgaria, Greece, the UK, Estonia, Latvia, Poland and Lithuania. 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 2019.
	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 8th globally.
$1,917bn	Total worldwide military expenditure in 2019, as estimated by SIPRI.
	The USA was the world’s largest spender, accounting for 38% of the total global spending.

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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.

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.

NATO Countries’ Defence Expenditure 2019

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

Figure 1 shows defence expenditure of NATO members during 2019 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 maintains its position as the largest defence spender in NATO, with expenditure of $730 billion, representing 3.5% of their GDP in 2019. The USA spent more than twice as much on defence in 2019 than the rest of NATO combined, and due to an increase of USA spending of roughly 10% between 2018 and 2019, this gap is the largest it has been since 2014. The UK remains the second highest spender in NATO in 2019, spending $59.4 billion on defence.

Figure 1: NATO countries defence expenditure (current 2019 prices and exchange rate (US$)), 2019 ^{[footnote 1]}

NATO Countries’ Defence Expenditure 2013-2019

Total NATO spending is the largest it has been since 2013.

Between 2013 and 2019, total NATO spending has increased by more than $50 billion. Despite steadily decreasing their defence expenditure at the start of this period, the USA increased their spending by more than $63.8 billion in 2019. This brought their total defence expenditure back up to a level above $700 billion which was last seen in 2013. NATO expenditure is heavily influenced by the USA who alone accounted for 71% of the total in 2019. NATO Europe and Canada has shown a continued increase in defence expenditure since 2014, with an increase of 4% between 2018 and 2019. During this period they increased their spending by $11.2 billion. Germany was the largest contributor to this, spending an additional $4.4 billion in 2019.

Figure 2: NATO defence expenditure 2013-2019 (2019 prices and exchange rate (US$))^{[footnote 2][footnote 3]}

UK, France and Germany are the three largest contributors to spending in NATO Europe and Canada.

The chart below shows how the defence spending of NATO Europe countries changed between 2013 and 2019, in the context of their overall 2019 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 an average increase of 0.9% between 2013 and 2019 which translates to an extra $3.0 billion. Meanwhile, Lithuania’s 45% increase during the same period only represents $0.98 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, 2013-2019^{[footnote 2][footnote 3]}

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 2013.

NATO sets a guideline for its members to spend at least 2% of national GDP on defence annually. In 2019 the UK was one of only eight NATO members to meet this guideline; the other countries being the USA, Bulgaria, Greece, Estonia, Latvia, Poland and Lithuania.

For the first time, Bulgaria have passed the 2% threshold, and are now second on the NATO rankings, showing 3.2% of GDP spent. This is due to an increase of $1.2 billion in 2019, which has more than doubled their total expenditure in 2018. This is predominantly due to the replacement of their MIG-29 with F-16 Block 70 fighter aircraft in July 2019.

Three member states spent less than 1% of GDP on defence in 2019; these were Spain, Belgium and Luxembourg. Luxembourg consistently spends the lowest percentage of GDP on defence, averaging just over 0.4% from 2013 through to 2019.

Figure 4: NATO countries’ defence expenditure as a percentage of GDP (2015 prices), 2019 ^{[footnote 4]}

NATO Countries’ Equipment Expenditure

Bulgaria’s fighter aircraft replacement sees it top NATO’s proportion of equipment expenditure ranking.

NATO sets a guideline that its members should spend at least 20% of their defence budget on equipment. In 2019, the UK was one of 15 countries to meet this target, spending 22.9% of its defence expenditure on equipment.

From 2015 to 2018, Luxembourg had consistently spent the largest proportion of defence expenditure on equipment of all NATO members despite having the smallest spend on defence as a proportion of GDP. In 2019 however, due to its increased expenditure on fighter aircraft, Bulgaria displaced Luxembourg from the top spot after outlaying almost 60% of its entire defence expenditure on equipment.

France, Turkey, the UK and the USA are the only countries to have consistently met this target since 2013.

Figure 5: NATO countries’ equipment expenditure as a percentage of defence expenditure 2019 ^{[footnote 5]}

SIPRI and IISS Defence Expenditure Rankings

Major defence sources continue to disagree on level of China’s 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, 2019 (US$)

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

There was a difference of $6.1 billion in UK spend between IISS and SIPRI, which is a consequential difference, as it affects whether the UK is considered the 6th or 8th largest global spender on defence.

Worldwide Military Expenditure 2019

NATO outspends Non-NATO members as gap widens.

SIPRI provides global estimates of defence spending which are displayed as a proportion of total global spending below. Global military expenditure in 2019 was estimated by SIPRI to be $1,917 billion, an increase of $95 billion in nominal terms since 2018. Spending by NATO members made up 54% of all global military expenditure.

Figure 7: Global military expenditure based on Market Exchange Rates (MER), 2019 ^{[footnote 6] [footnote 7]}

The USA remained the largest spender in 2019, accounting for more than the next ten largest spenders combined and making up 38% of total global military expenditure. This year Saudi Arabia dropped to fourth in the Non-NATO rankings, spending approximately $5.7 billion less than in 2018. This allowed India and Russia to move up to second and third respectively. SIPRI has not published figures for the UAE for the last five years. Based on the last recorded figure in 2014 they would have been in the top 20 highest spenders shown above.

Focus on NATO Allies 1980-2019

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.

Percentage of GDP

UK and USA continue to consistently meet NATO’s 2006 2% of GDP spending target.

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.

While 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 has been more variable. As a result of military activity in the Middle East, USA expenditure rose sharply to peak at over 5% of GDP in 2009 before then falling rapidly to 3.3% in 2018. USA spending as a percentage of GDP was again on the rise in 2019.

Figure 8: Defence spending as a % of GDP (current prices), 1980 to 2019 ^{[footnote 8]}

At NATO’s 2006 Riga Summit it was agreed by NATO members that nations would spend at least 2% of GDP on defence expenditure. At the time, the UK, France and the USA were all spending above this threshold. However, since 2010 only the UK and the USA have consistently met this target. France fell below the 2% target in 2009 when French defence expenditure began to exclude spending on its Gendarmerie.

Spending per Person

USA spending per person continues to fluctuate 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. After adjusting for inflation, expenditure per person in the USA is now at the same level as at the start of the 1st Gulf War owing to the rate of increased expenditure outweighing its increasing population.

Figure 9: Real Defence spending per person (constant 2019 prices), 1980 to 2019

Military Personnel by Population

Military personnel number relative to population remains constant for last five 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]}.

Figure 9 showed that USA expenditure per person increased substantially between 1999 and 2009. However, the actual number of military personnel per thousand population in Figure 10 shows a decrease over the same period. This would indicate that this additional finance was more likely spent on resources rather than on personnel.

Figure 10: Number of military personnel per thousand population, 1980 to 2019 ^{[footnote 10]}

As mentioned earlier, France updated its definition of defence expenditure in 2009 to exclude that on the Gendarmerie. The result was a dramatic decrease in French personnel per thousand population that year. Germany saw a similar, though much smaller, decrease after 2010 due to the abolition of conscription. The UK witnessed a fall 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.

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.

After adjusting for inflation, the UK has increased its spending per service person by $125,000 between 2012 and 2019. This is, however, largely because of a 40,000 person reduction in military personnel over the same period. Similar reasoning also applies for the increases for France and Germany across these years.

Expenditure per service person in the USA ceased its considerable rise in 2009 after peaking at $631,000 per person. From 2010 to 2016 its military personnel reduced by 126,000, and over the same period US expenditure fell by a total of $145 billion. The drop in expenditure greatly outweighed the falling personnel numbers causing the decrease shown in Figure 12. Since 2017, the reverse is true whereby military personnel has increased by 2.5% relative to a 9% increase in total defence expenditure.

Figure 11: Real defence spending per service person, 1980 to 2019

Methodology

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.

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.

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 (e.g. Market Exchange Rates (MER) or Purchasing Power Parity (PPP)) used to convert to a common currency or from current to constant (real terms) prices can result in significantly different rankings of global defence spending (see Figure 8). Using MER for instance 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. 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.

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.

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.

NATO Expenditure – Constant Prices and Exchange Rates

The estimates presented in Figure 2 are based on constant 2019 prices and, as far as possible, constant 2019 exchange rates.

The deflators used to convert current price totals into 2019 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 in 2013 and Lithuania between 2013 and 2014. This is because both of these countries moved from their national currencies to the Euro (in 2014 and 2015 respectively), so 2017 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.

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.

Further Information

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.

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.

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:

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For general MOD enquiries, please call: 020 7218 9000 *[GDP]: Gross Domestic Product *[NATO]: North Atlantic Treaty Organisation *[IISS]: International Institute for Strategic Studies *[SIPRI]: Stockholm International Peace Research Institute *[MER]: Market Exchange Rate *[PPP]: Purchasing Power Parity

1. Figures for 2019 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. ↩

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

6. 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. ↩

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

8. Historic figures in this chart differ from those shown in the 2019 bulletin due to exchange rate variations and updates to NATO expenditure figures that have since occurred. ↩

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

10. Historic figures in this chart, in particular the UK, may differ slightly from those shown in the 2019 bulletin due to revisions to population figures in the IMF World Economic Outlook Database and updates to NATO military personnel figures. ↩