ADS Group Limited Salamanca Square 9 Albert Embankment London SE1 [email protected]
www.adsgroup.org.uk +44 (0) 20 7091 4500
UK DEFENCE OUTLOOK2015A
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FOREWORD
The defence industry is of strategic importance to the UK, generating £22bn in turnover during 2014 and making a direct and vital contribution to national security.
Productivity within the defence industry continues to outpace national levels, growing by 17 per cent over the past four years compared with just six per cent in the rest of the economy. The percentage of companies with a UK-based supply chain has also increased, up by ten per cent since last year.
The defence industry sustains 250,000 jobs across the UK economy. These are high value, long-term jobs with earnings around 40 per cent higher than the national average. Defence companies prioritise skills and are training 4,400 apprentices.
2014 was a challenging year for the defence industry, with many of the figures in this ADS Group Outlook Report showing slight decline. This has been a tough period for the industry with both the UK and many international customers operating within constrained public resources.
Looking ahead, the Government’s commitment to an above-inflation increase to the defence budget coupled with the commitment to meet the two per cent NATO target on defence spending has provided welcome certainty and stability.
The Defence Growth Partnership (DGP) continues to provide a collaborative environment for the collective effort of Industry and Government to boost global competitiveness and grow exports, delivering a number of key initiatives including the UK Defence Solutions Centre (DSC). Working with a strengthened UKTI DSO, the UK DSC represents a step change in the sector’s ability to address global defence markets, bringing the very best that the UK has to meet the needs of the MoD and international customers.
The outcome of the Government’s Strategic Defence and Security Review is expected later this year. ADS has been able to provide significant industry input and to highlight the importance of investment in research and development. As well as boosting productivity levels, it generates the leading-edge capabilities that enable the UK to compete successfully for international market opportunities.
PAUL EVERITT Chief Executive, ADS Group
CONTENTS
Foreword 3
Summary 4
Achieving Growth 6
Investing in Productivity 10
Supporting High-Skill Jobs 12
About ADS 14
About the Data 15
4 5
UK DEFENCE INDUSTRY
£22bn 48%
146,000 4,400
12.5%
£8.5bn 17%
TurnoverExpect >10%
growth
Growth in last 5 years
% of exports, by domain
Air Land Maritime
of UK Defence Companies employ Apprentices and Trainees
Productivity growth, 2010 – 2014
UK Defence UK Economy
Employees Apprentices146,000
Direct UK Defence Sector jobs
108,000Indirect UK Defence
Sector jobs
Export orders Productivity growth
87% 8% 5%
68%
49% 32% 8 8% %
17% 6%
<10% 10-24% 25-49% <50%
76
UK DEFENCE INDUSTRY
48% OF FIRMS EXPECT GROWTH OF AT LEAST 10%
01
£22bn
£8.5bn
12.5%
Turnover
2014 Export Orders
Average Growth 2010 – 2014
UK Defence output has grown 12.5% since 2010
Defence company growth expectations
<10% 10-24% 25-49% >50%
• UKDefencesectorhasgrownby12.5%overthelast five years
• AroundhalfofUKDefencecompaniesexpectinggrowthofgreaterthan10%
• GrowthdrivenbyexportopportunitiesinNorthAmerica, Latin America and Asia-Pacific
10
12
14
16
18
20
22
24
2010 2011 2012 2013 2014
£19.2
£20.4£20.7
£21.6 £21.6
Source: CEBR, ADS and ONS
Source:ADS/GfK NOP Industry Intelligence Survey 2015
49% 32% 8% 8%
• NearlyhalfofDefencecompaniesareexpectingtogrowby10%ormoreinthenext 12 months
• Keydriversofgrowthinthenext12monthsinclude:
– Growthofexistingbusiness(78%)
– Newexportopportunities(55%)
– GrowthofUKopportunities(51%)
£b
n
98
55% SAY GROWTH IS DRIVEN BY NEW EXPORTS UK CENTRAL TO SUPPLY CHAIN & INVESTMENT
% exporting to location / % entering new market % of supply chain in location / % investing in location
74/8 13/29
N AmericaN America
L America L America
Europe Europe
UK
ChinaChinaAfrica
Africa
Middle East Middle EastAsia (excl China)
Rest of Asia
89/9
14/27
69/93
49/161/14
22/62/8
55/13
3/17
22/120/6
23/160/7
Source:ADS/GfK NOP Industry Intelligence Survey 2015 Source:ADS/GfK NOP Industry Intelligence Survey 2015
• 26%ofDefenceturnoverisgeneratedbyexports
• LocationswherecompanieshavecitedgrowingexportlevelsincludeNorthAmerica, Middle East and Asia (excl China)
• ThepercentageofcompaniesexportingtoNorthAmericahasincreasedbymorethan10%sincethepreviousADSsurvey
• UK,EuropeandNorthAmericaremainthefocalpointforglobaldefencesupplychain investment
• MinimalsupplychainpresenceinLatinAmerica,MiddleEast,AfricaandAsiaoffers opportunities for growth from new export opportunities
• ThepercentageofdefencecompanieswithaUK-basedsupplychainhasincreasedbyover10%sincethe2014ADSsurvey
1110
INVESTING IN PRODUCTIVITY02
£9bn
66%
17%
Gross Value Added
Increasing investment
Productivity growth since 2010
UK Defence GVA is contributing to UK growth, £bn
• Companiesfocusedoninvestinginbusinessdevelopment and design & engineering
• Defenceproductivityhasgrownby17%since2010,versusjust6%intherestoftheeconomy
Source: CEBR, ADS
5
6
7
8
9
10
2009 2010 2011 2012 2013 2014
8.5 8.4
8.8 8.79.0 8.8
INVESTMENT IN SALES & PRODUCTION CAPACITY
% of companies with plans for investment, overall & by function
Source: ADS, CEBR & ADS/GfK NOP Industry Intelligence Survey 2015
• Majorityofcompaniesfocusedoninvestmentindevelopingnewbusinessopportunities, and production capacity to meet increasing demand
• Investmentinapprenticeshasgrownby2%sincelastyear’sADSsurvey
• ThedeclineinplansforinvestmentinR&D&ProductionandAssemblyfromlastyear’s survey reinforces the need for the 2015 SDSR to encourage and support investment in these key areas
10% 27% 66%
62%Sales/business development
Production and assembly
Design and engineering
Apprentices and trainees
Research and Development
Company support staff e.g.
Consultancy
Maintenance
Manpower services
50%
52%
43%
43%
22%
20%
12%
10%
£b
n
1312
SUPPORTING HIGH-SKILL JOBS03
146,000
4,400
32,000
Employees
Apprentices & Trainees
British R&D, Design & Development jobs depend on
the UK Defence Sector
Company Support Staff
Sales/Business Development
Research, Design & Engineering
Production & Assembly
Consultancy
Other
UK direct Defence employment, (000s)
• 146,000directlyemployedbyUKDefenceindustry
• 68%ofcompaniesemployapprenticesortrainees
• Accesstohighlyskilledworkersremainsasignificant concern for the sector
Source: CEBR, ADS
90
100
110
120
130
140
150
160
170
2010 2011 2012 2013 2014
158157
154150
146
INCREASE IN HIGH SKILLED WORKFORCE
% of employees in UK Aerospace companies, by job function
Source:ADS/GfK NOP Industry Intelligence Survey 2015
• Over32,000R&D,Design&EngineeringjobsdirectlyintheUKDefencesector
• £37,400averagesalaryintheUKDefenceindustry,39%morethantheUKAverage (approx. £27,000)
• 1in5companiesarenotconfidenttheywillbeabletoaccessthenecessaryR&Dskills to drive innovation
• 85%ofcompaniesareconfidentinaccessingsales&businessdevelopmentskills to grow business opportunities
10%
15%
19%
22%
8%
26%
,000
s
1514
www.adsgroup.org.uk 0845 872 3231
ADS Group is the UK trade organisation representing the Aerospace, Defence, Security and Space sectors. ADS is focused on representing the interests of these valuable wealth producing industries in the UK and overseas to key stakeholders, government, and the media
ADS plays an instrumental role in bringing industry and government together, working closely and collaboratively to maintain and grow the UK’s world leading position in these industries. In doing so, these sectors will support and facilitate a sustainable UK economic recovery, securing future sector prosperity through a strong strategy and united approach.
Farnborough International Limited is a wholly owned subsidiary of ADS Group. The Farnborough International Airshow 2016 will run from 11-17 July 2016. In 2014, the Farnborough International Airshow saw over $200bn worth of confirmed orders.
In 2015, ADS Group commissioned two different research strands to assess the size, shape and priorities for the UK’s Aerospace, Defence, Security and Space sectors.
• ADS/GfKNOPSurvey. Between 06 March – 27 March 2015, GfK NOP conducted a web-based surveyed 900 ADS Members, asking 30 questions about employment, investment, export and growth trends. The Survey was web-based, with a 14% response rate.
• CentreforEconomics&BusinessResearch(CEBR).ADS commissioned CEBR to assess the turnover, employment and gross value added levels for each of ADS’s four sectors. Their research draws on data from Office National Statistics, Ministry of Defence, ADS Group and the ADS/GfK NOP Survey data.
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