Thursday, 15 September 2011

Defence and Higher Education

Judging by the response to Tuesday's post, pictures of battleships are the way forward for this blog so here is HMS Warspite, the hardest-fighting battleship in two world wars, pictured on shore-bombardment duty off Normandy in 1944.

To make some tentative connection to the original subject of this blog, I'm accompanying her with a post comparing the UK Defence and Higher Education industries from an exports and jobs perspective.

British HE had 125,045 non-UK EU and 280,760 non-EU students enrolled  in 2009/10 (the last year for which HESA data are available), At a rough estimate their fees would have come to £400 million and £2.8 billion respectively. In addition, £741,435 of research grants and contracts were from non-UK sources, for a total of around £4 billion in HE export earnings. The HE sector also employed 387,430 staff over this period. UK Government funding was £9,043,115 in funding body grants and £2,364,920 in research grant and contract to total rather less than £12 billion.

The MOD's defence statistics factsheet shows that UK defence exports in 2009 were £7,251 million; although the numbers have varied from year to year this is also fairly close to the average so let's take it as a good guidance figure. The total value of MOD contracts placed (i.e. excluding direct expenditure such as soldiers' wages) was £18,831 million. It looks as if both exports and the ratio of exports to UK Government spending in the defence industry is more better than in HE. MOD don't give data for employment in the industry, but an ADS survey gives it as just 109,675 (the ADS survey also gives a much higher figure for 2010 exports than the MOD figure for 2009, but I haven't used it because I'm not sure it is collected on a comparable basis).

However we need to consider some other factors. In the education industry, those 405,805 non-UK students must have spent at least £2 billion in the UK economy on housing, food and other essential services. Whilst some of this will have been earned in the UK through part-time work, much of it will not, so there's at least a further £1 billion of 'export' earnings for the UK.

By contrast, in the defence data, we need to consider the cost of imports. If a British company sells a jet plane to India, then the whole cost of the jet plane is shown as exports, but in reality many of the components might have been manufactured outside the UK. This is an acknowledged issue with all manufacturing export statistics. The data I can find don't allow me a complete view of this, but the MOD do list £3,619 million of defence-related service imports. There will be more than this in manufacturing, but in fairness to the defence industry I should note that many of the costs in the MOD link will be related to running an army in Afghanistan rather than the defence industry itself.

So the final balance comes out like this:

Direct Government support
£18.8 billion
£11.4 billion
Direct exports
£7.25 billion
£4 billion
-£3.6 billion
£1 billion
Adjusted exports
£3.65 billion
£5 billion
Cost to UK Government per £ of exports
Cost to UK Government per job

Now perhaps you think that the 71 warships, 650 combat helicopters and aircraft, and 357 tanks which the MOD can maintain because of this spending (remembering that none of these data include soldiers' or civil servants' wages) are worth more than the 716,940 students who qualified from UKHE in the year in question. I've said before that this blog doesn't exist to promote any particular political views I happen to hold. From a purely financial perspective, though, it's clear that HE is by far the better investment for the country.

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