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Is UK defence spending worth it? A call for a national debate about who, in the end, really benefits from Britain’s arms trade

The recent Defence and Security Equipment International (DSEI) exhibition in London’s ExCeL Centre shines a spotlight on the UK’s defence industry. Yet, the current focus on global military expenditure raises questions about where the nation’s substantial investment in defence truly goes.

Is it for the nation’s benefit, or does it predominantly line the pockets of global shareholders?

  1. Economic Concerns Over Investment: A look at the financial statements of firms serving the Ministry of Defence (MoD) suggests a concerning trend: vast state funds prop up the industry, but the main beneficiaries seem to be international shareholders. Even when the nation undergoes significant setbacks in defence projects, top suppliers have directed billions to their shareholders over the past decade. For instance, the MoD’s top five suppliers reportedly paid their shareholders £15bn between 2012 and 2022.
  2. Accountability & Transparency: The MoD’s history of contractual issues — be it overpriced aircraft deals or underperforming tanks — highlights a glaring need for accountability and transparency. If we’re to invest another £242bn in procurement over the next ten years, as this government appears to be assuring the industry this is the case, we need assurance that these funds are spent wisely and in ways that genuinely benefit the UK.
  3. The Role of R&D Financing: Leading arms companies invest significantly in R&D. Yet, a vast portion of this expenditure is footed by the British state. For instance, the largest UK-headquartered arms firm, BAE Systems, spent £2bn on research and development in 2022 – only 14% of which was paid for by the company itself. What this means is that public funds are directly contributing to projects that could directly benefit private interests. The fact it is ‘defence’ however, generally means there is little critical review of this imbalance in the British political or media corridors of power.
  4. Economic Contribution Vs. Investment: Despite claims of it being the UK’s jewel in the crown, the defence industry’s contribution to our national economy is dwarfed by other industries. In 2022, for instance, the defence sector added less value to the UK economy than the chemicals industry in the North West of England alone. This is despite the massive support the defence sector receives from the state. Such disparities call into question the true economic benefits of our defence investments.
  5. Misplaced Perceptions of Investment Benefits: Leading investment firms may hold substantial shares in our top defence companies, but it’s a misconception that such investments greatly benefit our local pensioners. The financial gains seem more directed toward private shareholder interests rather than local benefits. Research at Common Wealth, for instance, shows the MoD’s top ten suppliers paid shareholders a far greater share of their profits than the average FTSE-listed firm.
  6. Historical Lessons: The defence industry is not a reliable economy for future generations. Such vulnerabilities are very apparent when we reflect on past scenarios. After the Cold War, major defence suppliers, like General Dynamics, slashed their workforce while simultaneously rewarding top executives and shareholders. If public funds are invested in this sector, they should aim to ensure job security and national benefits, not merely enhance shareholder profits.
  7. Alternative Investment Strategies: There are more sustainable and inclusive strategies than just investing in defence. Worker-led initiatives that shift focus from solely defence production to other promising sectors, such as renewable energy, present a more balanced and beneficial approach. The problem is, in a world where power is aligned with not just military might but the historical traditions of the military aligned with the interest of the state – and the Crown – encouraging politicians not to invest in security and defence is, in some ways, a political unicorn.

In conclusion, while defence is undeniably essential for national security, the government must ensure that the UK’s massive investment in this sector directly benefits the nation and its citizens.

This calls for more transparency, accountability, and a strategic realignment of investment priorities to ensure a balanced national benefit over global shareholder gains.