The economicThe economic contribution contribution of BAE of BAE Systems to the UK in 2009 Contents Executive Summary ...........................................................................................................1 1 Introduction .................................................................................................................4 1.1 BAE Systems in the UK........................................................................................................4 2 The direct economic contribution of BAE Systems.................................................8 2.1 Employment at BAE Systems...............................................................................................8 2.1.1 Regional contribution to employment..........................................................................8 2.1.2 Contribution to UK skilled employment.......................................................................9 2.2 Fixed investment at BAE Systems .....................................................................................10 2.3 Exports of BAE Systems ....................................................................................................10 2.4 Value added of BAE Systems ............................................................................................11 2.5 Tax contribution of BAE Systems.......................................................................................12 2.6 Research and Development via BAE Systems ..................................................................13 3 The indirect and induced economic contribution of BAE Systems .....................14 3.1 Indirect employment supported by BAE Systems ..............................................................14 3.2 Indirect value added supported by BAE Systems ..............................................................16 3.3 Indirect contribution to taxes supported by BAE Systems .................................................18 3.4 Induced value added, employment and tax supported by BAE Systems ..........................18 3.5 Sum of direct, indirect and induced economic contributions of BAE Systems...................19 4 Regional and local development .............................................................................20 4.1 Introduction.........................................................................................................................20 4.2 The Policy Context .............................................................................................................20 4.3 BAE Systems in the knowledge economy landscape ........................................................22 4.4 The wider impacts of BAE Systems procurement..............................................................31 5 The catalytic and dynamic contribution of BAE Systems.....................................33 5.1 Impact of R&D spending.....................................................................................................34 5.2 Skills, education and innovation within BAE Systems........................................................37 5.3 BAE Systems’ wider contribution to skills, education and innovation ................................38 5.4 Corporate Responsibility Programmes...............................................................................38 Appendix: Economic contribution of Warton................................................................40 A.1 Key findings ...........................................................................................................................40 A.2 Introduction............................................................................................................................40 A.3 Approach to measuring the contribution of Warton...............................................................40 A.4 Description of results .............................................................................................................41 A.5 The local employment impact of Warton ...............................................................................42 A.6 The impact of procurement from Warton on the North West region .....................................46 Economic Contribution of BAE Systems to the UK April 2011 – Final Report Executive Summary BAE Systems is a UK-headquartered principal defence systems supplier BAE Systems is a global defence and security company headquartered in the UK. The company’s range of activities consists of the design, development and manufacturing of defence equipment/products (such as ships, submarines and aircraft), equipment preparation and support, cyber security, border and transport security, and high technology electronic systems. The company employed 97,200 people worldwide in 2009. The company’s UK operations employed 42,360 people in 2009 measured on a full-time equivalent (FTE) basis. The company is the largest manufacturing-based employer in the UK in terms of the number of people employed, and is the country’s largest single private sector employer of professional engineers, with over 18,000 FTE engineering staff. Total revenues accruing to the UK part of the business were £9.2 billion in 2009. BAE Systems represents a substantial base of intellectual capital in the UK, and continues to invest in maintaining and upgrading that capital. BAE Systems makes major contributions to UK GDP, taxes, investment, R&D and skills BAE Systems is a substantial contributor to the UK economy through employment, value added (GDP), taxes, investment and R&D spending. In 2009 BAE Systems directly employed over 42,000 people in the UK on a FTE basis The company’s direct (value-added) contribution to UK GDP was £3.3 billion in 2009 prices. Productivity at BAE Systems, as measured by value added per FTE employee, was £78,175 in 2009. This was 85% higher than the estimated UK economy average of some £42,200, and 34% higher than the estimated average for the manufacturing sector of £58,300. Productivity at BAE Systems is above the estimated level in financial and business services. In addition, the company’s UK operations generated net exports of £4.9 billion and contributed £653 million in taxes for the UK economy. Combined company and contract-funded R&D spending totalled nearly £900 million. However, BAE Systems’ total economic impact is much greater than just its direct contribution. Its spending on goods and services supports jobs and GDP in firms and industries in the wider economy. These are the supply-chain or “indirect” benefits of BAE Systems to the UK economy. In 2009 BAE Systems spent an estimated £4.1 billion on the procurement of equipment, components, raw materials, rent, energy and services from UK suppliers. In addition, the jobs dependent on the company (both direct and via supply-chain effects) stimulate consumer spending in the general economy. These are the “induced” benefits of BAE Systems to the UK economy. Thus, when indirect and induced effects are taken into account BAE Systems’ overall impact on the UK economy is even more significant, with the company supporting 125,000 jobs in total. The indirect employment multiplier for BAE Systems is around 1.2. This means for every 10 jobs directly created by BAE Systems in the UK, another 12 jobs are supported in the supply chain. Accounting for induced effects a further 7 jobs are supported in the wider economy. 1 Economic Contribution of BAE Systems to the UK April 2011 – Final Report Furthermore, BAE Systems provides “catalytic” and “dynamic” contributions to the UK economy (such as support for R&D) which contribute to increased productivity and living standards in the longer term. It is estimated that R&D spending channelled through BAE Systems adds a cumulative 1% to UK GDP over a period of 12 years. Table ES-1 below provides a summary of BAE Systems’ impacts on the UK economy. Table ES.1: Summary of BAE Systems’ economic impact on the UK economy, 2009 Direct Indirect Induced Total contribution contribution contribution contribution Employment (FTE jobs) 42,360 52,088 31,000 125,448 Investment (£m) 198 - - 198 Exports (£m) 4,879 - - 4,879 Taxes (£m) 653 518 300 1,471 Value added (£m) 3,311 2,407 1,400 7,118 R&D Adds cumulative total of 1% to GDP over 12 years Community benefits £1.6 million donated to charity in UK in 2009. Source: BAE Systems, Oxford Economics Productivity is high BAE Systems’ staff productivity, as measured by value added per FTE employee, was approximately £78,175 in 2009. This is 85% above the national average and 34% higher than that in the overall manufacturing sector. BAE Systems makes an important contribution to regional (knowledge) economies, particularly in the North West The North West is by far the most important region within BAE Systems UK, accounting for about half of all of its UK employment. BAE Systems now accounts for exactly one in eight jobs in knowledge- intensive production within the North West. The role of BAE Systems’ Warton site has a particular local significance, contributing over 8,700 jobs and £300 million in value added to the economy of the North-West. BAE Systems also has a particularly important impact in areas such as Barrow-in-Furness where nearly 80% of manufacturing jobs are provided by the company. The company also has a strong direct employment presence in the South East and Scotland. BAE Systems is a major supporter of R&D The R&D funds channelled through BAE Systems (and BAE Systems’ own internal R&D spending) have a catalytic or spillover effect,