Chapter 1 - Finance

Trade

This section contains information on defence trade. This includes the estimated value of export orders of defence equipment and services and payments made for services consumed by MOD establishments overseas. Table 1.13 estimates the total value of export orders of defence equipment and services. Table 1.14 presents the estimated value of MOD Balance of Payments for Trade in Services.

The UK Trade & Investment arm of the Department for Business, Innovation and Skills (BIS) collects data on defence export contracts and they relate to orders placed. These data are collected from the UKTI DSO publication 'The World Defence Export Market' compiled via a quarterly survey with known UK defence contractors.

MOD Trade in Services are provisions of services between UK residents and non-residents (e.g. training, cleaning services, IT support etc) and transactions in goods which are not freighted out of the country in which they take place. They are published in an ONS 'First Release' and 'The Pink Book'.

More information outlining the methodology behind these tables can be found in DASA Defence Statistics Bulletin No.4 and in the National Statistics Quality Review, detailing Trade Statistics and MOD Balance of Payments Statistics respectively.

IMPORTANT NOTE: Cessation of Defence Export Delivery Statistics (formerly UKDS 2008 Table 1.13 and 'top half' of Table 1.14)

Ministers agreed that the Ministry of Defence will no longer compile estimates of identified defence equipment export deliveries because the data do not directly support MOD policy making and operations. The final estimates (for 2007) were published in UK Defence Statistics 2008 last year.

This decision was announced on the MOD website on 14 November 2008 and was the subject of a full internal and external review which was explained to internal and external customers at the DASA consultation meeting on 2nd June 2009.

DASA has long held major concerns about the quality of the underlying data and, despite consideration of alternative methods for data collection by the pan Whitehall Defence Trade Statistics Working Group (DTSWG), it had been concluded that no viable options for improved data collection remain. This decision was based on a number of factors including the likelihood of an increased burden on business to collect additional data; significant problems with identifying the military/civil split by the licence alone; the current incompatibility of cross-departmental administrative systems; and the difficulties with sharing sources between government departments. Even to begin to improve the quality of the underlying data would require a significant investment from MOD, BIS and HMRC to align administrative systems and data collection methods at a time when budgets across Whitehall are extremely stretched. Further information outlining recent developments with Trade Statistics and an assessment of the quality of the underlying data is given in DASA Defence Statistics Bulletin No.8. This is available on the DASA website.

Although data pertaining to defence export deliveries will no longer be published, the UK Trade & Investment (UKTI) arm of BIS will continue to produce its own estimates of export orders placed (as opposed to deliveries made, which the DASA statistics sought to capture) each year in conjunction with the Society for British Aerospace Companies (SBAC). This will be unaffected by the change, and these statistics will continue to be published in UKDS. UKTI consider the value of export orders to be the key indicator for the health of the UK export market and is their 'currency of choice' when briefing Ministers, the press and the wider defence industry. The Business Development and Market Intelligence division are now responsible for monitoring and promoting the health of the UK export market which inevitably involves closely tracking the life of major defence orders, including potential cancellations.

Additionally, detailed information of export licences and numbers of small arms and weapons will continue to be published in the Annual Report on Strategic Arms Exports Controls published by FCO. This is available online: http://www.fco.gov.uk/en/about-the-fco/publications/publications/annual-reports/export-controls1.

Main Findings

Estimated UK identified defence export orders (Table 1.13)

  • Estimated UK identified export orders of defence equipment and services were estimated to be nearly £4.4 billion in 2008. Following the significant increase in export orders in 2007 (see footnote 1 of Table 1.13), the value of orders have broadly returned to average historical levels.

Balance of Payments: Trade in Services (Table 1.14)

  • In 2008, the MOD's estimated Balance of Payments for Trade in Services was £3.3 billion in deficit made up of £3.6 billion debits and £0.3 billion credits. The deficit has increased by some £0.9 billion compared to the previous year. This increase was mainly due to two factors. First, the stronger Dollar/Euro exchange rates against the pound which has increased the cost of purchasing these currencies during 2008 and second, an increase in expenditure in both currencies on Urgent Operational Requirements.