Destination of the Defence Pound

pounds money cash

RUSI have released a very interesting paper on defence acquisition finances and a measure of what the return on investment is when ‘buying British’

Click to read more.

This is a fascinating subject, they have calculated that 28% of equipment and services sourced from UK, or where the supply chain is largely UK based, is returned to the government in income tax and national insurance contributions alone. Add in corporation tax and other factors and the figure rises, one would assume.

It is a hugely complex subject but the simplistic view is that when buying British the government gets an effective third off the sticker price. Whether this is valid in a globalised defence market where supply chains or complex and where international corporations have subsidiaries is another complex issue.

Buying off the shelf may seem superficially attractive but it is fraught with risk, as we have experienced with items as simple as Mastiff spares or ammunition.

From a non-joined-up MoD only perspective, it never sees direct revenue from these inflows, in effect, the MoD is subsidising the Treasury, so why should it pay the premium when it never sees the benefit but again, one could argue that is rather simplistic because it all comes and goes from the same pot.

No doubt this will add fuel to the debate on the upcoming defence industry strategy policy that is supposedly ‘imminent’, signposted by the Green Paper Equipment, Support and Technology, on and various reports have indicated that the policy will largely focus on buying off the shelf products from overseas where there is a financial saving to be made.

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