The economic costs and benefits of UK defence exports

This study examines the economic costs and benefits to the UK of a 50 per cent cut in UK defence exports from the average level of 1998 and 1999. The net impact on the government budget is estimated to be an ongoing loss of between around £40 million and £100 million a year: around 0.2-0.4 per cent of the total UK defence budget. In addition, there is estimated to be a one-off net adjustment cost, spread over five years, of between £0.9 billion and £1.4 billion. A further more speculative adjustment cost (estimated at around £1.1 billion) could result if the loss of income associated with the ‘terms-of-trade’ effect were also included. In terms of the wider debate about defence exports, the results of this study suggest first that the economic effects of the reduction in defence exports are relatively small and largely one-off, and secondly that the balance of arguments about UK defence exports should be determined mainly by non-economic factors.