At first glance, The Economic Impact of the British Army, a report produced by Oxford Economics on behalf of the British Army, presents itself as a sober, data-driven analysis of how the UK’s armed forces contribute to national prosperity. It offers a wide array of statistics on “spillover effects”, “multipliers”, and “induced employment”. But beneath this polished veneer lies a fundamentally flawed narrative that echoes the long-discredited dogma of “Military Keynesianism” — the notion that defence spending is a route to economic salvation. A dogma that, post-Brexit, has become a hallmark of British right-wing economic theory and a way, in their eyes, to give the ailing economy a much-needed adrenaline boost.
Let’s start with our review of the report from the perspective of potential bias. Oxford Economics is one of the world’s largest independent global advisory firms, boasting clients that range from multinational corporations to governments and trade associations. Positioned as a “neutral economic consultancy,” it markets itself as an authority on impact analysis and economic forecasting. However, neutrality should not be mistaken for objectivity. Consultancies like Oxford Economics operate in a commercial ecosystem where reports are produced to serve the interests of paying clients. In this case, the British Army is not merely the subject of the report — it is the client that commissioned it. It is therefore no surprise that the report flatters its patron and argues for more, not less money, to be sent its way.
Reports of this nature do not exist in a political vacuum. Defence spending is a hotly contested issue, particularly as the UK navigates post-Brexit economic uncertainty, austerity-induced public service pressures, and a government facing questions over military expenditure.
The report itself has to be read against the backdrop of recent Daily Telegraph op-eds that have headlines like: “Britain’s cash-starved military no longer has the capacity to fight for King and country“. That particular polemic held bold claims without offering up much in the way of proof, such as: “rearmament can actually be a powerful enabler of economic growth, and thereby become self-financing.”
The Oxford Economics report, then, serves an ideological function. It reinforces right-wing notions that defence spending is both economically justifiable and socially beneficial. And it’s been commissioned and released by the British Army at a very specific time – when many are arguing for larger defence budgets. Of course, in the report itself, this political agenda is never explicitly acknowledged. The report is framed as a neutral piece of economic analysis, when in truth it is a sophisticated lobbying document.
The Mirage of Multipliers
At the heart of the report is the claim that for every 100 jobs directly created by the Army, an additional 240 jobs are “supported” elsewhere in the economy. This is presented as a mark of the Army’s catalytic role in stimulating growth. But multipliers are not immutable truths; they are the result of assumptions, and in this case, those assumptions warrant scrutiny.
Multipliers are most powerful in sectors with wide and varied supply chains — construction, infrastructure, and green energy, for example. These industries stimulate local economies by purchasing a wide range of materials and services from local suppliers. By contrast, military contracts often flow to a small number of specialised suppliers, many of which are large multinationals with offshore operations. It is difficult to see how large weapons manufacturers like BAE Systems generate “local” economic spillovers comparable to, say, an infrastructure project that sources cement, steel, and labour from regional supply chains. And the report does not mention bonuses or dividends once.
Indeed, the report fails to note just how much individual profits some people make from UK and other defence contracts. For instance, earlier this year Charles Woodburn, CEO of BAE Systems, sold £6.7 million worth of personal shares in June 2024, part of a broader £10.9 million divestment of his holdings. The sale occurred amid record share price highs following Israel’s October 2023 attack on Gaza, which saw BAE’s share price rise 31%, boosting Woodburn’s profits by an estimated £2.89 million. Such profiting by individuals (as opposed to wider societal benefit) is entirely ignored by Oxford Economics.
Contrast the focused profits of individuals in defence to other labour-intensive projects such as housing or education investment, ones that typically have higher employment multipliers because they draw on a large, diverse pool of workers. The report’s suggestion that Army jobs generate such significant secondary employment effects is dubious. In reality, many of these “induced” jobs are likely low-paid, precarious work in retail or hospitality — hardly the foundation for long-term, sustainable economic development.
Economists like Simon Kuznets have long argued that military spending distorts employment patterns, with the state essentially “crowding out” investment in civilian sectors. The Oxford Economics claim that defence spending has unique job-creating properties is therefore questionable. Kuznets argued that military spending does not stimulate the economy in the same way as infrastructure or public health investment. The kinds of jobs created are often less durable and less socially valuable than those in healthcare or education. Oxford Economics makes no attempt to acknowledge or counter this, despite the fact that such critiques are well known.
You get the sense this report was written for generals, not economists.
The Spin-off Myth
Another pillar of the report is the claim that the Army’s R&D spending generates long-term “spillover effects” for the economy. According to the report, the £169 million the Army spent on R&D in 2023/24 will produce an annual increase of £86 million in GDP by 2035, driven by improvements in technology that are presumed to “trickle down” into the wider economy. This is known as the “spin-off” argument — the idea that military R&D can seed commercial innovation.
The spin-off argument has been around for decades, with proponents pointing to the internet, GPS, and semiconductors as examples of technologies that emerged from defence-related R&D. But, as Mariana Mazzucato points out in The Entrepreneurial State, these claims are often exaggerated. While military funding did play a role in the development of such technologies, it was public sector civilian research and commercialisation, not military procurement, that brought these technologies to market. GPS, for instance, only became commercially viable after civilian-led regulatory changes in the 1990s.
The problem with the “spillover” argument is that military R&D is rarely designed to benefit the civilian economy. The technologies developed are often too niche, secret, or specialised to have meaningful civilian applications. A targeting system for missiles does not easily convert into a logistics system for supermarkets. Unlike publicly funded R&D in universities or open research consortia, military R&D tends to be locked behind closed doors, inaccessible to civilian firms. Yet Oxford Economics makes no effort to explain how this supposed “spillover” is meant to occur. It is simply asserted, without evidence, that technological advancements in defence will somehow “boost productivity” in other sectors.
Mazzucato has criticised such logic as a distortion of innovation policy. In her view, defence R&D is often less efficient than civilian R&D because it lacks commercial incentives. Whereas universities are incentivised to publish their findings and firms are incentivised to commercialise discoveries, military R&D contracts are shrouded in secrecy. This means that even if a useful innovation is developed in the military sector, its commercial benefits may never be realised.
The Opportunity Cost of Militarisation
Perhaps the most glaring flaw in the report is its refusal to address the question of opportunity cost. This is Economics 101. For every pound spent on the British Army, that is one pound not spent on healthcare, education, clean energy, or infrastructure. And yet the report treats military spending as if it exists in an economic vacuum, free from any trade-offs.
Opportunity cost is one of the most fundamental concepts in economics, and it was one of John Maynard Keynes’ central insights. When a government spends money, it must ask: What else could we have done with this money? This Army report never confronts this question.
What could the UK have achieved if the £16.6 billion that supported the Army’s “economic footprint” had been redirected towards public health or green energy? Economists such as Ha-Joon Chang have argued that public infrastructure spending and industrial strategy offer higher returns than military spending, because they create positive externalities and long-term productive capacity. Unlike military equipment, which sits idle in peacetime, a hospital, a school, or a renewable energy plant produces value continuously. If anything, the UK has just handed over vast tranches of weapons to Ukraine, in an act of generosity that has had little regenerative benefit economically to the UK.
Joseph Stiglitz made a similar point in The Three Trillion Dollar War, co-written with Linda Bilmes, which dissected the hidden costs of the Iraq War. They argued that war-related spending is “extractive” rather than “productive” — it extracts resources from the economy without creating ongoing wealth. Unlike bridges, hospitals, or high-speed rail, a military drone generates no long-term return. It is a depreciating asset that provides security, but little else.
The opportunity cost of military spending is even more acute in the context of regional inequality. The report emphasises that the Army creates jobs in economically deprived regions like the North East. But this is a distraction. Investment in social housing, broadband infrastructure, or decarbonisation could have created even more jobs in the same region, but with lasting economic dividends.
The Political Function of the Report
Reports like The Economic Impact of the British Army do not emerge in a political vacuum. They exist to justify policy. With UK defence spending rising and calls for political support for new defence budgets increasing by the day, this report serves a clear agenda: to bolster the case for continued and uncriticised military expansion.
The authors of the report are not impartial. Oxford Economics produced the report at the behest of the British Army, and like many consultancy firms, it caters to its client’s interests. It aims to establish a narrative that military spending is not a burden, but a boon. It offers a rhetorical arsenal for policymakers who wish to justify higher defence budgets in an era of austerity.
Reports of this nature have a long history in the politics of military spending. Similar justifications were made for Reagan’s Star Wars programme, NATO’s post-9/11 expansion, and the Iraq and Afghanistan wars. But if the economic history of those endeavours tells us anything, it is that wars do not pay for themselves. By presenting defence as a profit-making enterprise, The Economic Impact of the British Army commits a fallacy as old as war itself: the belief that violence creates value.
It is a seductive idea, but a dangerous one.
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