Official Statistics

MOD regional expenditure with UK industry and commerce and supported employment 2019/20

Updated 12 August 2021

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.

This publication presents MOD expenditure with UK industry and commerce in 2019/20 by UK region and industry group. The number of direct and indirect jobs^{[footnote 1]} supported by this expenditure in the UK is also presented. The statistics include direct MOD expenditure with UK industry and commerce only, and exclude all other MOD spend types.

1. Key Points

£20.3bn	Total MOD expenditure with UK industry and commerce.
	This is a 3% increase on 2018/19’s reported expenditure after adjusting for inflation.
£300	MOD expenditure with UK industry for each person living in the UK.
	With inflation accounted for, this figure has remained the same for the fourth year in a row.
202,000	Total number of direct and indirect jobs supported through MOD expenditure with UK industry.
	This comprised of 125,000 direct jobs and 77,000 indirect jobs in 2019/20, up from a combined total of 190,000 the year before.
1 in 130	Proportion of all direct and indirect jobs in the UK which are supported as a result of MOD expenditure with UK industry.
	This remains unchanged from 2018/19.
77,000	Total number of direct and indirect jobs supported in Technical, Financial and Other Business Services as a result of all MOD expenditure with UK industry.
	Total MOD expenditure supports more jobs in this sector than in any other industry group.
22%	The rise in direct jobs supported from MOD expenditure in Scotland since 2018/19.
	Increased expenditure on Construction and Shipbuilding in Scotland helped to boost total direct jobs supported in the region in 2019/20.

2018/19 AND 2019/20 JOB ESTIMATES IN THIS PUBLICATION HAVE BEEN REVISED FROM THOSE PUBLISHED IN JANUARY 2021

This publication has been re-released following the availability of latest data from the Office for National Statistics (ONS) for employment and turnover. The ONS data had been delayed due to the impact of COVID-19 at the time of the original publication in January 2021. The ONS figures are used to calculate our employment estimates, so the estimates provided in this publication have been revised from those published earlier this year.

Responsible Statistician: Analysis-Expenditure Head of Branch

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Background Quality Report: Background Quality Report

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2. Introduction

This publication provides statistics on direct MOD expenditure with UK industry and commerce. Industry is defined as an economic activity concerned with the procurement and processing of raw materials into finished products. Commerce is defined as a business activity where goods and services are exchanged for value. Hereafter, direct MOD expenditure with UK industry and commerce will be referred to as MOD expenditure. Tables and figures present statistics for the most recent financial year and comparisons will be made in the narrative to previous financial years where appropriate. Detailed statistics can be found in the supporting data tables.

MOD expenditure will be presented in the following ways:

• by ITL Level 1 regions.
• per person by UK region, to provide some context to the expenditure figures. By presenting expenditure per person the population differences between regions are accounted for.
• by industry group.

This publication also presents estimates on the number of direct and indirect full-time equivalent (FTE) jobs supported in the UK by MOD expenditure.

Direct jobs will be presented:

• by ITL Level 1 regions.
• as the number of FTE jobs supported for every 100,000 people in FTE employment in each region. This measure is similar to the per person expenditure figure as it considers the employment levels of each region and will make these figures more directly comparable.
• by industry group.

Indirect jobs will be presented by industry group only. No reliable regional split can currently be given as there are no regional Input-Output Analytical Tables available from the Office for National Statistics (ONS) from which these estimates are derived. The limitations of this are discussed further in the Methodology and Background Quality Report.

Context

Estimates on regional expenditure and direct jobs have been produced in recent years within the Regional Expenditure bulletin series. As well as looking at the split of direct expenditure with UK industry across UK regions, the bulletin estimates the number of direct jobs supported. These are the jobs supported within companies receiving payments for goods and services directly from MOD.

Prior to this, estimated jobs figures were published as part of the UK Defence Statistics (UKDS) publication and included both direct and indirect jobs. Indirect jobs are those that occur further down the supply chain through sub-contracting or via suppliers to the direct contractor.

Due to increased demand to once again produce figures on indirect jobs, an Experimental Statistic was released by the Analysis Directorate containing these estimates in the Indirect Jobs bulletin. These figures have subsequently been subsumed into the Regional Expenditure bulletin and the information contained in this bulletin has potential for a wide range of users including the media, politicians, policy professionals and the general public.

Comparisons over time: overall

These statistics are based on MOD contract information and display natural variability. As a result, we would expect total expenditure to fluctuate year-on-year due to large value contracts starting and ending across different financial years or large one-off payments occurring. MOD Direct Expenditure figures published up until 2009 in UK Defence Statistics showed a similar amount of variation between years to the figures presented in the rest of this bulletin. This variability is likely carried over to the jobs estimates, which are furthermore particularly sensitive to changes in employment figures provided by the ONS.

Comparisons over time: by region and industry group

Throughout the bulletin we will compare data across different financial years. With a short time series, any trends could be due to the inherent variability of contract data and not indicative of a long-term trend. Therefore, these comparisons should be used with caution.

Comparisons over time: accounting for inflation

In simple terms, inflation measures how the cost of goods/services change over time. Inflation of 2% would mean that something that you could purchase for £1 last year would cost you £1.02 this year. Because of this, inflation can mask effects when comparing expenditure across different years. To account for inflation, expenditure is calculated in constant prices. This adjusts expenditure in one year so that it is in another year’s prices. Constant 2019/20 prices are used when comparing across different financial years.

Comparisons over time: to previously published statistics

Please note that these statistics are broadly similar to the Direct Expenditure with UK industry statistics published until 2009 in UK Defence Statistics, but should not be directly compared due to methodological differences. Since estimates of employment were previously produced, output per FTE has increased across most industries. Output per FTE is calculated as an industry’s total output divided by its number of FTE employees and can be used as an indicator of how much output is generated for each FTE employee in the industry. If MOD expenditure in an industry remains the same and output per FTE employee increases, then we see greater productivity per FTE employee and witness a reduction in the number of jobs estimated. This is of particular relevance in industries where MOD expenditure is high such as Shipbuilding and Aircraft manufacturing and repair. In addition, earlier estimates also included expenditure and jobs supported as a result of exports.

ADS (a trade organisation for Aerospace, Defence and Security) publish annual estimates of the number of direct jobs supported in the Defence Sector in their annual Industry Facts and Figures publication. ADS estimates are based on a specific definition of what constitutes the defence sector and also include estimated employment as a result of defence exports. In contrast, the estimates produced in this publication are based on all MOD expenditure with industry and include elements of spending that wouldn’t necessarily be considered as ‘defence’, such as financial services, so the two estimates are not directly comparable.

Accuracy

Several assumptions have been made during analysis of this data. For further information on these, and for more detailed explanations of the applications and limitations of this data, please refer to the Background Quality Report.

To access all of the data in both current and constant prices please see the supplementary data tables.

3. MOD Expenditure with UK Industry

MOD expenditure increases by 3% in 2019/20 after consistent spending in previous three years.

Total MOD expenditure in 2019/20 was £20.3 billion. Despite seeing nominal increases year-on-year between 2016/17 and 2019/20, expenditure remained relatively consistent between 2016/17 and 2018/19 once inflation is taken into account. However, MOD expenditure in 2019/20 was above the rate of inflation, and 3% higher than that reported the previous year. This puts total spending at a similar level to that seen in 2015/16.

Figure 1: Total MOD Expenditure by Financial Year

Time series graphic of MOD expenditure from 2013/14 to 2019/20. Before rising in 2019/20, expenditure in current prices had remained fairly consistent. Yet adjusting for inflation it shows a considerable drop in spending between 2014/15 and 2016/17.

Scotland sees increased MOD expenditure for sixth consecutive year.

The South West had the largest increase of MOD expenditure in absolute value, and despite already being the region receiving the largest proportion of MOD expenditure, this was still an increase of almost 7% from 2018/19. Scotland, the North West, the South East and the West Midlands also saw substantial increases in regional expenditure of over £200 million each in 2019/20 compared to the year before.

Scotland is the only UK region to have seen an increase in year-on-year spending in each year since 2013/14. Compared to the previous year, Scottish expenditure increased by almost 15% in 2019/20 and its regional total now accounts for a little over 10% of all MOD expenditure with UK industry. This was driven principally by increased in-year payments to BAE Systems Surface Ships Ltd relating to the manufacture and demonstration phase of the Type 26 frigate programme out of the company’s Glasgow shipyards.

London observed the largest reduction in total expenditure in absolute terms from 2018/19 to 2019/20 where it fell by £365 million. After holding steady around the £1.5 billion mark for the previous three years, this fall places the region’s expenditure at its lowest level over the period between 2013/14 and 2019/20. This was predominantly due to a reduction in payments for Aircraft and Spacecraft, and Technical, Financial and Other Business Services.

Figure 2: MOD Expenditure by Region 2019/20

Horizontal bar chart showing MOD’s regional expenditure in descending order for 2019/20. The South West and South East appear first and second respectively, accounting for over half of all UK spend.

The South of England received 52% of MOD expenditure in 2019/20 and has consistently received over half of total spend in each year from 2013/14 onwards. It is perhaps not surprising that this collective area of the UK is the dominant recipient of MOD spending since a high proportion of the MOD’s biggest suppliers can be found in the South East and South West of England including Babcock, BAE, Rolls-Royce and Thales, among others.

The largest single in-year contract payment in 2019/20 was with Devonport Royal Dockyard Ltd at £734 million. Although for the most part operated out of the main Devonport site in Plymouth, this contract saw work further contracted to Scottish shipyards. The contract’s combined work on the Maritime Support Delivery Framework ensures the continuing support of the Royal Navy’s surface fleet, including the two Queen Elizabeth class aircraft carriers.

This single contract payment itself was greater than the amount spent in Yorkshire and The Humber, the North East and Northern Ireland combined. The disparity in spending between regions is such that for every £1 of MOD expenditure in 2019/20, 28 pence effectively went to the South West whilst less than 1 pence went to each of the North East and Northern Ireland.

4. MOD Expenditure per Person with UK Industry

MOD expenditure per person remains at the same level for fourth year in a row.

Expenditure per Person Calculated by dividing the total MOD expenditure by the population of an area. This shows how much money is spent for each person living in that area.

MOD average expenditure per person for the UK was £300 in 2019/20. After adjusting for inflation, this has remained at a consistent amount since 2016/17 but is roughly 10% lower than the initial high of £330 seen in 2013/14. The expenditure per person decrease is larger than that of total expenditure, where MOD spending only decreased by 4% over the same period, with the effect being amplified by a growing UK population.

With regional population figures taken into account, the South West is still placed as the top ranked region for receiving MOD spending. Due to denser population numbers in the South East, expenditure per person in the South West is almost double that of the South East in second place. It is also almost 25 times that spent per person in the North East.

Figure 3: MOD Expenditure per Person with UK Industry by Region 2019/20

Map of the UK split by region showing MOD expenditure per person in 2019/20. Even after adjusting for regional populations the South of England still shows the highest expenditure levels.

Reduced expenditure in Wales sees Scotland move up to third in regional MOD expenditure per person rankings.

London falls to 9th place in Figure 4 from 5th in Figure 2 (which displays total expenditure) due to its high population density. Wales, in contrast, historically ranks higher when expenditure is adjusted by population. However, after increasing by 11% the year before, expenditure in Wales in 2019/20 fell by 18%. This wasn’t necessarily due to contracts beginning or ending but a combined effect of lower in-year payments to the region, showing the nature of the inherent variability of contract data. Coupled with an increasing population, this led to a decrease of almost £70 per person.

With the exception of Wales, four of the top five ranked UK regions in 2019/20 for MOD expenditure per person all saw considerable increases to their regional expenditure. Outside of this grouping, only the West Midlands saw a substantial increase in spending between 2018/19 and 2019/20. The additional spend for the West Midlands was driven by increased payments to Babcock DSG Ltd for fleet management, repair and maintenance services of military vehicles and weapon systems.

Figure 4: MOD Expenditure per Person, Ranked from Highest (1) to Lowest (12) by Region

Line graph showing MOD regional expenditure per person ranked from highest to lowest from 2013/14 to 2019/20. All regions have seen changes in their ranking positions over this time aside from the South West in first and the South East in second.

5. MOD Expenditure with UK Industry by Industry Group

Expenditure on Shipbuilding increases by 12%.

Standard Industrial Classification (SIC) codes These codes are collected on the MOD contract system and classify which specific industry a contract relates to. These SIC codes are grouped together into industry groups.

Please note that typically only one SIC code is assigned to each contract, even though many contracts will involve multiple different industries. On some of the higher value contracts we have sought more detailed industry information, however for many contracts only a single code is available.

The top three industry groups to receive MOD expenditure has remained unaltered in order from 2014/15 to present. Technical, Financial and Other Business Services has furthermore occupied the top spot in each year since 2013/14, recently increasing by an additional 7% from 2018/19 to 2019/20. Whilst initially not a clear and obvious spending category for the MOD, this sector does include research and development, engineering drafting, and related technical testing and analysis. It therefore makes up a key component of current and future defence programmes with 29% of the industry’s work occurring in the South East in 2019/20.

Since 2013/14, MOD expenditure in Aircraft and Spacecraft has decreased by 43%. Combined with increased defence spending on Shipbuilding and Repairing, the sector dropped to third spot in ranked expenditure by industry group in 2014/15. Over time, this has been a result of steadily reducing payments towards the RAF’s now retired Tornado jets. The 5% decrease in Aircraft and Spacecraft manufacturing observed between 2018/19 and 2019/20 was despite a £73 million increase in payments to the remaining in-service Typhoon element of the NATO Eurofighter and Tornado Management Agency (NETMA).

Expenditure on Shipbuilding and Repairing has increased by almost two thirds of that spent in 2013/14. Aside from between 2015/16 to 2016/17 it has seen a rise in industry spending in every year since then. 2019/20 saw MOD Shipbuilding expenditure increase by nearly 12%, which was the largest percentage increase of all sectors. In part, as discussed earlier, this was a result of increased contract payments for the Type 26 frigate work in Scotland and the South West. Its growing sector expenditure was also aided by rising spend against the Dreadnought class submarine programme operating out of the North West by BAE Systems Marine Ltd. Together, these next generation vessels form the future Continuous At Sea Deterrent and Carrier Strike Group as laid out in the National Shipbuilding Strategy and Defence Equipment Plan.

Figure 5: MOD Expenditure by Industry Group 2019/20

Horizontal bar chart showing MOD expenditure by industry group in descending order for 2019/20. Spend against Technical, Financial and Other Business Services, and Shipbuilding and Repairing is significantly greater than other industry groupings.

Note:

‘Technical, Financial Services & Other Business Services’ includes Financial Services, Business Services, Education, Health and Other Service Activities.

‘Other Manufacturing’ excludes Weapons and Ammunition, Electronics, Precision Instruments, Shipbuilding and Repairing, and Aircraft and Spacecraft.

6. Total Jobs Supported by MOD Expenditure with UK Industry

Total jobs supported by MOD expenditure rises by 12,000 in 2019/20 to 202,000.

Full-Time Equivalent (FTE) employment Full-time equivalent (FTE) employment is a figure that allows part-time workers’ hours to be put into the same units as full-time workers. This publication often uses the term jobs to mean full-time equivalent employment.

UK turnover per Full-Time Equivalent employment This shows how much money an industry takes for each person in FTE employment. It therefore allows us to estimate the number of jobs supported by MOD expenditure by dividing expenditure with UK industry by turnover per FTE employment for that industry.

It is estimated that MOD expenditure supported 202,000 FTE jobs in the UK in 2019/20 which is equivalent to 1 in every 130 jobs. This figure includes both direct and indirect jobs so accounts for employment through direct supplier payments as well as that arising through the supply chain. It is just over 6% higher than estimates for 2018/19 when 190,000 jobs were supported.

The increase was largely driven in absolute terms by direct jobs which rose by 9,000. Over the past seven financial years, the number of indirect jobs has been roughly two thirds that of the direct jobs estimate in any year.

Total jobs figures experience inherent variability due to the fluctuations of year-on-year total contract expenditure from which they are derived. They are also particularly sensitive to changes in employment figures provided by the ONS. This was of particular relevance in 2017/18 where the ONS reported a decrease in UK wide employment figures in three key sectors where MOD expenditure is high, namely Shipbuilding, Aircraft Manufacturing, and Technical, Financial and Other Business Services. For this reason, year-on-year comparisons should be used with caution.

Figure 6: Total Jobs Supported by MOD Expenditure by Financial Year

Stacked bar chart showing the change in MOD supported employment between 2013/14 and 2019/20, split by direct and indirect jobs. Both employment types saw a decrease in 2017/18 before increasing in 2019/20.

The figure of 202,000 jobs only includes jobs supported through MOD expenditure with UK industry and does not include civilian personnel employed by the MOD nor those serving in the armed forces. Figures published by the Analysis Directorate show that in April 2019 the MOD employed 58,000 civilian personnel and 144,000 UK regular forces. This shows that through direct expenditure, indirect expenditure and direct public sector employment, the MOD supported just over 404,000 jobs in 2019/20, almost 389,000 of which were based in the UK.

7. Direct Jobs Supported by MOD Expenditure with UK Industry

Jobs directly supported by MOD increased by 9,000 in 2019/20.

Through its direct expenditure across the UK economy, the MOD supported an estimated 125,000 UK based direct FTE jobs in 2019/20, up from the 116,000 jobs reported in 2018/19. Direct jobs are defined as those jobs supported within companies receiving payments for goods and services directly from MOD. When viewed as direct jobs alone, this supported employment equated to 1 in every 210 jobs in the UK in 2019/20, up from 1 in every 220 seen in both of the previous two years.

Figure 7: Direct Jobs Supported by MOD Expenditure by Financial Year

Time series graphic of total direct jobs supported by MOD expenditure from 2013/14 to 2019/20. After falling sharply in 2017/18, the total direct jobs figure increased in 2019/20 to be almost on par with its previous levels.

As mentioned earlier, jobs supported in 2017/18 were particularly sensitive to variable employment rates reported by the ONS in three of MOD’s key industries. In the case of Aircraft and Spacecraft manufacturing, there was a drop of almost 8% in the industry’s expenditure by the MOD between 2016/17 and 2017/18. Owing to both lower spending and lower employment in the sector, estimates for MOD supported direct jobs in the industry fell sharply by almost a third that year.

South West and South East account for over half of all MOD supported UK jobs.

The total number of direct jobs supported by MOD expenditure has increased by 9,000. Matching the regional expenditure increases seen for 2019/20, this was mostly spread across four regions; the South West, the South East, Scotland and the North West. Much like with the expenditure figures also, the South East and South West account for over half of all the MOD supported direct jobs in the UK. Interestingly, despite decreases in year-on-year expenditure between 2018/19 and 2019/20, both the East of England and Yorkshire and The Humber saw a rise in direct jobs supported.

The reduction in East of England expenditure was principally down to work on the design and construction of new build hangar and airfield operating facilities at RAF Marham by Galliford Try Infrastructure Ltd coming to an end in mid-2019/20. The end of this high value, multi-year contract considerably reduced the region’s jobs relating to Construction and Aircraft. This decrease however was outweighed by increases across elements of the Technical, Financial and Other Business Services sector. This latter industry now accounts for 29% of all MOD supported employment in the East of England.

In Yorkshire and The Humber, Galliford Try’s contract for barracks development on behalf of the Defence Infrastructure Organisation (DIO) at Catterick Garrison drew to a close in early 2019/20. A 50% decrease in Construction related regional employment was offset by increased job numbers both in Hotels, Catering and Restaurants, and Technical, Financial and Other Business Services. Thanks to rising contract spend with Aramark Defence Services Ltd for mess catering and facilities management, the two industry groups combined now account for 72% of Yorkshire and The Humber’s MOD supported jobs.

Figure 8: Direct Jobs Supported Through MOD Expenditure by Region 2019/20

Horizontal bar chart showing, in descending order, direct jobs supported through MOD expenditure by region for 2019/20. The graph shows that the number of jobs supported was dominated by the South West and South East.

8. Direct Jobs Supported by MOD Expenditure with UK Industry per 100,000 FTE Employment

Direct jobs supported by MOD expenditure in Scotland increase by 22%.

Jobs per 100,000 FTE Employment To compare the number of jobs supported by MOD expenditure across regions we have calculated jobs supported per 100,000 people in full-time equivalent (FTE) employment in each region. This adjusts the figures for the population and employment levels of the regions.

MOD expenditure in 2019/20 supported 480 direct jobs per 100,000 FTE employment in the UK which is up from 450 jobs per 100,000 in 2018/19. In Figure 8 we saw that MOD expenditure supported a comparably high number of jobs in both the South West and South East of England, yet when this is adjusted for overall levels of employment in each region we see in Figure 9 that MOD supported employment per 100,000 jobs is dominated by the South West. By reason of its increased expenditure, the South West now supports a further 160 jobs per 100,000 in FTE employment compared to the year before, the largest increase in absolute terms of all regions.

Due to increased regional expenditure in the Shipbuilding and Repairing industry, Scotland and the North West now account for 62% of all MOD supported employment in the sector. Both regions have a strong footing in MOD supported employment in Shipbuilding and over 50% of both regions’ direct jobs lie in this industry.

Figure 9: The Number of Direct Jobs Supported Through MOD Expenditure for Every 100,000 People in FTE Employment by Region 2019/20

Map of the UK split by region showing the number of direct jobs supported by MOD expenditure per 100000 people in full-time equivalent employment in 2019/20. Lower job numbers are observed in Northern Ireland and down the East coast of England.

Notably between 2018 and 2019 the ONS reported that Scotland and Wales saw decreases in the number of employees as a whole in each of these two UK regions.

With total employment down across the board in Wales coupled with lower observed MOD spending, it is not unexpected to see this translate to a reduction in the number of jobs supported in the region by MOD expenditure. Lower in-year payments for UK military flying training out of RAF Valley saw expenditure for this service return to a similar level to that in 2017/18 and was the main driving factor for lower job estimates. This is despite the estimated number of jobs supported for Wales in the Weapons and Ammunition industry further increasing to 1,000 in 2019/20, owing to the ongoing work on the AJAX vehicle with General Dynamic UK Ltd, and munitions supply with BAE Systems Global Combat Systems Munitions Ltd.

In the case of Scotland, and compared to the year before, total MOD expenditure in the region was substantially higher in 2019/20. The higher payments discussed earlier in the Shipbuilding sector accounted for an additional 1,800 MOD supported jobs in the industry. Meanwhile, provisions for P-8A infrastructure at RAF Lossiemouth and the replacement of the Glen Mallan Northern Ammunition Jetty has strengthened jobs supported in the Construction industry by a further 700 FTE jobs. As a result, direct jobs supported in Scotland climbed from 490 jobs per 100,000 in 2018/19 to 600 jobs per 100,000 in 2019/20.

Wales drop down to fifth in overall rankings for jobs supported per 100,000 people in FTE employment.

These variations in estimated employee numbers and overall regional employment resulted in the only changes to the regional ranking positions for jobs supported per 100,000 people in FTE employment whereby Scotland and North West overtook Wales to sit in third and fourth place. Wales dropped down to fifth place.

Figure 10: The Number of Direct Jobs Supported Through MOD Expenditure for Every 100,000 People in FTE Employment, Ranked from Highest (1) to Lowest (12) by Region

Line graph showing MOD supported direct jobs by region per 100000 people in full-time equivalent employment, ranked from highest to lowest, from 2013/14 to 2019/20. Wales, overtaken by Scotland, falls below third place for the first time since 2015/16.

Although appearing to have remained steady, the total number of jobs supported by MOD expenditure in the East Midlands has continued its decrease over the last four years and now stands at 330 per 100,000 in FTE employment. In 2019/20, lower in-year payments to Rolls-Royce Submarines Ltd for their work on the Next Generation Nuclear Propulsion Plant (NGNPP) PWR3 reactor for the Dreadnought submarine programme strongly contributed to the lower jobs estimate.

9. Direct Jobs Supported by MOD Expenditure with UK Industry by Industry Group

Direct jobs supported in Shipbuilding and Repairing rise by 14%.

Using SIC codes we can estimate how many direct jobs are supported in each industry group by dividing MOD expenditure in each group by turnover per FTE employment.

The highest number of jobs supported through MOD expenditure in 2019/20 was in the Technical, Financial and Other Business Services sector. Combined growth in UK regional MOD spending in the industry has increased its estimated number of direct jobs supported by just under 10% in 2019/20 compared to the previous year. It still supports nearly twice the amount of direct jobs than the next ranked industry group although Shipbuilding and Repairing did close the gap slightly after jobs in the latter sector rose by 14%.

Computer Services now completes the top three highest sectors in terms of jobs supported having moved up from 4th place in 2018/19 and comes as MOD continues to move with its Modernising Defence Programme. However, outside of the top two ranking positions the job figures are much closer with Computer Services (3rd), and Aircraft and Spacecraft manufacturing (8th) only being separated by 2,200 jobs in 2019/20.

Hotels, Catering and Restaurants was ranked 12th when summarised by total expenditure in Figure 5 yet when viewed in terms of direct jobs supported it climbs to 5th. This is due to a much lower turnover per FTE employment than other industries. Conversely, Aircraft and Spacecraft is ranked 3rd in order of MOD expenditure but only reaches 8th place in number of direct jobs supported. This is influenced by a high turnover per FTE employment owing to the specialist nature of work in the sector.

Figure 11: The Number of Direct Jobs Supported Through MOD Expenditure by Industry Group 2019/20

Horizontal bar chart showing direct jobs supported by MOD expenditure in 2019/20 broken down by industry group. Jobs in Technical, Financial and Other Business Services, and Shipbuilding and Repairing greatly outnumber the other sectors.

Note:

‘Technical, Financial Services & Other Business Services’ includes Financial Services, Business Services, Education, Health and Other Service Activities.

‘Other Manufacturing’ excludes Weapons and Ammunition, Electronics, Precision Instruments, Shipbuilding and Repairing, and Aircraft and Spacecraft.

10. Indirect Jobs Supported by MOD Expenditure with UK Industry

Indirect jobs supported by MOD expenditure increase to 77,000 in 2019/20.

MOD expenditure indirectly supported an estimated 77,000 FTE jobs in the UK in 2019/20, an increase of 3,000 to the figure estimated in 2018/19. Indirect employment refers to those jobs generated as a result of supporting and supplying goods and services to those in direct employment. It is therefore a measure of jobs that occur further down the supply chain through sub-contracting or via suppliers to the direct contractor.

The number of indirect jobs supported by MOD expenditure has remained relatively consistent apart from a slight fall in 2017/18. A similar drop was seen in the direct jobs but here this had particular relevance to indirect employment in the Technical, Financial and Other Business Services sector since this accounts for the largest proportion of indirect jobs supported through MOD expenditure. In 2019/20, indirect jobs estimated to be supported by MOD has returned to a number more comparable to the 79,000 observed in 2016/17.

Figure 12: Indirect Jobs Supported by MOD Expenditure by Financial Year

Time series graphic of total indirect jobs supported by MOD expenditure from 2013/14 to 2019/20. Although more consistent than their direct jobs counterparts, a slight decrease in indirect jobs was also observed in 2017/18.

The percentage decrease in indirect jobs supported in 2017/18 was roughly similar to that for direct jobs due to the way in which the figures are derived. For direct jobs, employment is solely estimated for the industry the contract is tendered for, i.e. a Shipbuilding contract will report jobs in Shipbuilding only. For indirect jobs, each industry will demand products and services from other industries such as, for example, where Shipbuilding will require metalwork, engineering activities, technical testing, etc. Where overall UK employment decreases in a couple of industries, as with Technical, Financial and Other Business Services in 2017/18, due to this sharing out of demand for goods and services across wider UK industry, the impact on an individual industry can be felt across multiple sectors.

11. Indirect Jobs Supported by MOD Expenditure with UK Industry by Industry Group

MOD expenditure on Shipbuilding supports the most indirect jobs across UK wide industry.

Using ONS Input-Output Tables, ONS Supply-Use Tables and known direct MOD expenditure against each industry we can estimate the indirect effect of MOD expenditure in the supply chain. From this demand on goods and services arising from MOD expenditure, we can subsequently estimate how many indirect jobs are supported in each industry group by dividing the demand in each group by its respective output per FTE employment.

When viewed in terms of the number of indirect jobs that MOD expenditure in each industry group alone supports, it is expenditure on Shipbuilding and Repairing that comes out on top for indirect employment. In 2019/20, £3.8 billion was spent in the Shipbuilding industry which supported 27,100 direct jobs in the same industry group and a further 19,400 indirect jobs across all industry sectors. It should be clearly noted that these indirect jobs are not necessarily further jobs in the Shipbuilding industry but rather made up of all industry components that are required to deliver end products and services in this sector.

Services and manufacturing dominate indirect jobs supported.

The highest number of jobs indirectly supported through MOD expenditure in 2019/20 was in the Technical, Financial and Other Business Services sector with 32,400 jobs. Since 2013/14 it has supported over double the number of jobs than the next ranked industry group, Other Manufacturing. Combined, these two industry groups accounted for 60% of all indirect MOD supported employment in 2019/20.

It is perhaps not surprising that there are more jobs supported in services or general manufacturing within the extended supply chain than in any other industry groups. These are likely to form part of the output from some of the more specialised industries where MOD expenditure is high such as in Shipbuilding, or Aircraft and Spacecraft manufacture.

Figure 13: The Number of Indirect Jobs Supported Through MOD Expenditure by Industry Group 2019/20

Horizontal bar chart showing, in descending order, indirect jobs supported by MOD expenditure in 2019/20 broken down by industry group. Jobs here are dominated by those in the services and manufacturing industries.

Note:

‘Technical, Financial Services & Other Business Services’ includes Financial Services, Business Services, Education, Health and other Service Activities.

‘Other Manufacturing’ excludes Weapons and Ammunition, Electronics, Precision Instruments, Shipbuilding and Repairing, and Aircraft and Spacecraft.

12. Methodology

This section sets out the data requirements and processes used to create the tables and charts in this bulletin. More detailed explanations of data sources, assumptions and methodologies used in this publication can be found in the Background Quality Report and Annex A. Any specialist terminology or acronyms used below (and throughout the publication) are defined in the Glossary.

Sources

As well as using MOD expenditure data identified by MOD’s Contracting, Purchasing and Finance (CP&F) system and information from individual MOD project teams, considerable data input for the estimation of jobs relies upon releases from the ONS.

• Supply-Use Tables (SUTs) are produced annually to show estimates of industry inputs and outputs, product supply and demand, and gross value added for the UK. SUTs for 1997 to 2018 are consistent with the UK National Accounts 2020 Blue Book.
• Input-Output Analytical Tables (IOATs) are produced semi-regularly and are derived from the SUTs. They highlight how products are used to produce further products and satisfy final demand across ONS industry codes.
• NOMIS annual data on regional employee and employment count.
• Annual UK population estimates produced by the ONS.
• Data on UK employment and turnover by MOD SIC group is produced by the ONS as a subset of the Business Register and Employment Survey (BRES) and Annual Business Survey (ABS).

Assumptions and Limitations

Various assumptions have had to be made throughout the process when concrete or reliable information was not available. These assumptions are listed in the Background Quality Report.

Regional Expenditure Figures

Location of Work (LOW) codes associated with HQ contracts are used to allocate expenditure to specific regions and calculate expenditure with UK industry. This expenditure is added to the Miscellaneous payments that have a UK postcode as the billing address. Expenditure with Other Government Departments (OGDs) and Trading Funds (TFs) are removed from both the HQ and Miscellaneous payments and added back in with improved location and work type information. This included expenditure with AWE, DIO, DSG/DECA, HRMS, JPA, NETMA, OCCAR and UKHO. Any electronic Procurement Card (ePC) expenditure is distributed based on the location of MOD personnel. Once combined, this provides a breakdown for MOD expenditure by region. This information is further presented as expenditure per person which is calculated using ONS mid-year population data. This is presented on choropleth maps to show expenditure in each region of the UK.

Industry Group Expenditure Figures

HQ contracts have SIC code information associated with them which identifies the type of work involved for each contract. MOD spending is aggregated over similar industries and used to calculate expenditure by industry group for these contracts. Miscellaneous payments have no SIC code assigned to them so the distribution of SIC codes from the HQ contracts is applied in this case. Expenditure against OGD or TF contracts that do not have a SIC code is distributed following discussion with project teams. Combining this expenditure we get a total figure for MOD expenditure by SIC group which is further aggregated into industry groups for presentation.

Estimating Direct Jobs Supported by MOD Expenditure

Turnover per full-time equivalent (FTE) employment for the UK is calculated by dividing turnover figures obtained from the ABS, by employment figures from the BRES. We can then divide MOD expenditure for each region and industry group by its respective industry’s turnover per FTE employment figure. This provides an estimate of how many direct jobs are supported by MOD expenditure in each region as well as in each industry group. This information is also presented as the number of direct jobs supported for every 100,000 people in FTE employment in the area, which is calculated using employment figures from the BRES and NOMIS.

Estimating Indirect Jobs Supported by MOD Expenditure

To estimate the number of indirect jobs supported in the UK by MOD expenditure, we use direct MOD expenditure with UK industry as a measure of MOD’s demand for products and services across the UK economy. By aggregating the ONS Input-Output Table from the IOATs to match the SIC groups used by MOD, we can use this table to show total UK wide demand and output (including intermediate products) arising from this initial MOD demand. Subtracting MOD final demand from this leaves just the intermediate demand (i.e. that which occurs throughout the supply chain). An estimate of UK output per FTE employment is calculated using the ONS Supply of Products Table in the SUTs and BRES employment data. The amount of UK output generated from MOD intermediate demand is then divided by output per FTE employment to determine the number of indirect jobs supported by MOD expenditure. Due to the method employed in their derivation, as well as showing the overall total, these estimates can be presented by industry group.

13. Glossary

Annual Business Survey (ABS) is the main business survey carried out by the ONS. It is used to collect financial information on a large proportion of the UK economy and includes figures such as turnover, employment costs and capital expenditure.

Atomic Weapons Establishment (AWE) works under contract to the MOD and is responsible for national nuclear security and supporting the Continuous At Sea Deterrence (CASD) programme.

Basic Prices indicate values excluding taxes and subsidies on products.

Business Register and Employment Survey (BRES) is a survey carried out by the ONS that provides information on employee and employment estimates by location and industry.

Commerce is defined as a business activity where goods and services are exchanged for value.

Constant Prices indicate a value from which the effects of inflation have been removed. A constant price refers to a year as the basis for the calculation, e.g. “constant 2019/20 prices”. This would mean that historic expenditure figures have been adjusted so that they are in 2019/20 prices and take account of the effects of inflation.

Contracting Purchasing and Finance (CP&F) provides a single online end to end procurement system for all MOD procurement activity. All other processes, especially paper-based systems, will be either replaced or subsumed.

Current Prices are when expenditure is presented without removing the effects of inflation. This can cause difficulties when comparing expenditure across different years as inflation affects the value of a currency.

Defence Electronics and Components Agency (DECA) is a government organisation dedicated to maintenance, repair, overhaul, upgrade and procurement in defence avionics, electronics and components.

Defence Infrastructure Organisation (DIO) is responsible for the day-to-day estates activity at the MOD including maintenance, construction and sustainability of rural and built MOD estates.

Defence Science and Technology Laboratory (Dstl) was a former Trading Fund of MOD, created in July 2001. It supplies impartial scientific and technical research and advice to MOD and other government departments. In April 2017 it ceased to be a Trading Fund and became an On-Vote Defence Agency of MOD.

Defence Support Group (DSG) was a former Trading Fund of the MOD created following the merger of Army Base Repair Organisation (ABRO) and Defence Aviation Repair Agency (DARA) on 1 April 2008. On 1 April 2015 the land repair and maintenance business was sold to Babcock. The remaining part of the business, the Air division and Electronics and Components division, stayed under MOD ownership as DECA.

DEFFORM 57 Completion of this form was mandatory for all contracts where Defence Business Services (DBS) were the payment authority. It was used to set up a contract with DBS for payment purposes and was an important source of capturing data on contract activity within the Ministry of Defence. The form has now been subsumed into CP&F as data is input directly to the system by Commercial Officers.

Direct jobs are defined as those supported within companies receiving payments for goods and services directly from MOD.

electronic Procurement Card (ePC) is the first choice purchasing tool for goods and services, which are not covered by contractual arrangements and allows individual units to process mainly small value purchases. The cards are issued and monitored by the responsible Finance team.

Full-Time Equivalent (FTE) Employment is a figure that allows part-time workers’ hours to be put into the same units as full-time workers.

HQ Contracts are formal contracts set up by MOD Core Department which were previously set up by a DEFFORM 57. Details of HQ contracts are now recorded within CP&F with the data being input directly by Commercial Officers.

Human Resources Management System (HRMS) is a personnel administration system for civilians working at the MOD.

Indirect jobs are generated as a result of supporting and supplying goods and services to those in direct employment. It is therefore a measure of jobs that occur further down the supply chain through sub-contracting or via suppliers to the direct contractor.

Industry is defined as an economic activity concerned with the procurement and processing of raw materials into finished products.

Industry Groups are 22 groups based on the Standard Industrial Classification (SIC) 2007 guidelines maintained by the Office for National Statistics (ONS). Industry groups combine SIC codes that are related to similar types of activity. A breakdown of which SIC codes belong in each industry group can be found in the accompanying data tables to this publication.

Input-Output Analytical Tables (IOATs) are produced semi-regularly by the ONS and are derived from the Supply-Use Tables. They highlight how products are used to produce further products and satisfy final demand across ONS industry codes. These tables were historically produced once every five years due to the time it takes to compile additional data requirements yet due to the increased demand for their use this has been reviewed to become more timely. At point of release, the latest detailed tables are still those from 2015.

Input-Output Table (IOT) is one of the main tables from the Input-Output Analytical Tables. It shows which products go to produce other products as intermediate production.

Intermediate Demand is demand for goods and services that occurs throughout the supply chain.

International Territorial Levels (ITL) Level 1 Regions are 12 UK regions used in the production of statistics.

Joint Personnel Administration (JPA) is a personnel administration system used by the British Armed Forces.

Leontief Inverse Matrix shows how much of each industry’s output is needed to produce a unit of a given industry’s output. It is calculated from the ONS Input-Output Analytical Tables (IOATs).

Location of Work (LOW) Codes are entered on to the DEFFORM 57 or CP&F system, and indicate where work for a contract is being carried out. There are many codes for different areas of the UK and these have been amalgamated to identify the regions being reported on.

Ministry of Defence (MOD) is the United Kingdom government department responsible for implementation of government defence policy.

Miscellaneous Payments are the payment method employed by DBS Finance (MOD’s primary bill paying authority) for running service items such as the provision of utilities. These items are covered by “miscellaneous” transactions, where no MOD HQ Contract exists. These agreements for goods or services will have been set up locally between the MOD Branch and the supplier and are legally binding.

MOD Vector of Final Demand is in-year MOD expenditure for a given financial year broken down by SIC groups.

NATO Eurofighter and Tornado Management Agency (NETMA) is the prime contractor for the Eurofighter Weapon System. The arrangements for the management of the Eurofighter programme were set out in the NATO Charter dated 18 December 1995, in which the international management agencies of the Tornado and Eurofighter programmes were integrated into a single agency, NETMA. This NATO agency is essentially a multi-nation HQ project office for these two collaborative projects, involving the UK, Germany, Italy and Spain. In the UK, Eurofighter is now called ‘Typhoon’.

NOMIS is a service provided by the Office for National Statistics (ONS) to give free public access to detailed and up-to-date UK labour market statistics from official sources. It contains readily accessible data from the Business Register and Employment Survey (BRES).

Office for National Statistics (ONS) is responsible for the production of a wide range of independent economic and social statistics. The statistics are there to improve understanding of the United Kingdom’s economy and society, and for planning the proper allocation of resources, policy-making and decision-making. It is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK Government’s single largest statistical producer.

Organisation Conjointe de Coopération en Matière d’Armement – the Organisation for Joint Armaments Co-operation (OCCAR) was originally set up in November 1996 by France, Italy, Germany and the UK with the aim of improving the efficiency and lowering the cost of managing co-operative defence equipment programmes involving European nations (e.g. A400M). Belgium and Spain are now also members.

Other Government Departments (OGDs) refers to government departments outside the MOD that the MOD spends money with.

Standard Industrial Classification (SIC) Codes classify business establishments and other statistical units by the type of economic activity in which they are engaged. The classification is maintained by the ONS.

Supply-Use Tables (SUTs) are produced annually by the ONS and show estimates of industry inputs and outputs, product supply and demand, and gross value added for the UK.

Trading Funds (TFs) were introduced by the Government under the Trading Funds Act 1973 as a “means of financing trading operations of a government department which, hitherto, have been carried out on Vote”. They are self-accounting units that have greater freedom, than other government departments, in managing their own financial and management activities. They are free to negotiate their own terms and conditions with their staff. For this reason, their grading structures do not always match that of the rest of the Ministry. From 2017/18 there is now only one MOD Trading Fund - UK Hydrographic Office.

UK Hydrographic Office (UKHO) was formed as a Trading Fund of the MOD in 1996 and is responsible for the provision of global hydrographic products and services to UK Defence and commercial mariners. In addition, UKHO discharges the UK’s obligation to provide hydrographic products and services needed for safe navigation in UK waters.

14. Further Information

14.1 Symbols

Figures marked with a superscript ^p are provided as provisional estimates.

Figures marked with a superscript ^r are revised from the last edition.

14.2 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. Total expenditure figures have been rounded to the nearest £ million, and per person expenditure figures have been rounded to the nearest £10. Total estimates for jobs supported by MOD expenditure have been rounded to the nearest 1,000, the number of jobs supported by MOD expenditure by region or industry group have been rounded to the nearest 100, and the number of jobs supported per 100,000 in FTE employment have been rounded to the nearest 10.

14.3 Revisions

Corrections to the published statistics will be made if errors are found, or if figures change because 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.

14.4 Contact Us

The Analysis Directorate 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:

Analysis Directorate (Analysis-Expenditure)

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 to the Ministry of Defence under the Freedom of Information Act 2000.

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

Analysis Directorate (Analysis-Expenditure)
Ministry of Defence
Oak 0 West, #6028
MOD Abbey Wood North
Bristol
BS34 8QW

For general MOD enquiries, please call: 020 7218 9000

1. This publication often uses the term jobs to mean full-time equivalent employment. ↩