Official Statistics

MOD regional expenditure with industry 2022/23

Published 8 February 2024

The Finance and Economics Statistical Bulletin series provides figures on the composition and scope of the Department’s expenditure, information on the impact of defence spending on the wider economy, and compares Ministry of Defence (MOD) spending to that of other departments and countries.

This publication presents MOD expenditure with UK industry and commerce in 2022/23 by UK region and industry group. The statistics include direct MOD expenditure with UK industry and commerce only, and exclude all other MOD spend types.

This publication has been split and now only includes MOD expenditure estimates.

Prior to 2022/23, these statistics were published in MOD Regional Expenditure with UK Industry and Supported Employment statistics.The decision was made to split the expenditure and jobs estimates into separate statistics to improve on timeliness and quality of the expenditure statistics. The latest job estimates for 2021/22 can be found in the original publication, while new statistics for 2022/23 will be released later this year. The methodology used to produce the regional expenditure estimates has been reviewed and as a result revisions have been made to data for 2020/21 and 2021/22 to allow for consistent comparisons across years. The revision has resulted in a 1% decrease in total UK industry expenditure for 2020/21 and a 3% increase for 2021/22.

1. Key Points

£25.0 billion	Total MOD expenditure with UK industry and commerce in 2022/23.
	This represents an 8%, or £1.8 billion, increase on the reported expenditure for 2021/22, when accounting for inflation.
25%	The rise in MOD expenditure with UK industry in Wales since 2021/22.
	Defence expenditure in Wales in 2022/23 was £780 million. This is the highest figure reported for the region since 2019/20.
£370	MOD expenditure with UK industry for each person living in the UK in 2022/23.
	This is an increase from the £350 reported in 2021/22, with inflation accounted for.
£2.1 billion	Total MOD expenditure in Weapons and ammunition in 2022/23.
	This represents a 76% increase on the reported expenditure for 2021/22, or an extra £906 million, when accounting for inflation.
5%	Proportion of MOD expenditure on Small and Medium-sized Enterprises in 2022/23.
	This translates to just under £1.4 billion spending with SMEs.

Responsible statistician: Analysis-Expenditure Head of Branch

Telephone: 030 015 86554

Further information/mailing list: Analysis-Expenditure-PQ-FOI@mod.gov.uk

Background quality report: Background Quality Report

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2. Introduction

This publication provides statistics on direct MOD expenditure with UK industry and commerce. Industry is defined as an economic activity concerned with the procurement and processing of raw materials into finished products. Commerce is defined as a business activity where goods and services are exchanged for value. Hereafter, direct MOD expenditure with UK industry and commerce will be referred to as MOD expenditure. Tables and figures present statistics for the most recent financial year and comparisons will be made in the narrative to previous financial years where appropriate. Detailed statistics can be found in the supporting data tables.

MOD expenditure will be presented in the following ways:

• by ITL Level 1 regions (for clarity these will be referred to as regions in text).

• per person by UK region, to provide some context to the expenditure figures. By presenting expenditure per person the population differences between regions are accounted for. • by industry group.

• the total amount spent on Small and Medium-sized Enterprises (SMEs), by ITL Level 1 regions. • the total amount spent with industry outside the UK.

2.1 Context

Estimates on regional expenditure have been produced in recent years within the Regional Expenditure bulletin series. Prior to this, regional expenditure with UK industry were published as part of the UK Defence Statistics (UKDS) publication, before ceasing in 2009.

2.2 Comparisons over time: overall

These statistics are based on MOD contract information and display natural variability. As a result, we would expect total expenditure to fluctuate year-on-year due to large value contracts starting and ending across different financial years or large one-off payments occurring. MOD Direct Expenditure figures published up until 2009 in UK Defence Statistics showed a similar amount of variation between years to the figures presented in the rest of this bulletin.

2.3 Comparisons over time: by region and industry group

Contract payment data can fluctuate naturally across years due to occurrences of large payments and therefore, comparison of longer term trends is preferential to year on year comparisons which should be used with caution.

2.4 Comparisons over time: accounting for inflation

In simple terms, inflation measures how the cost of goods/services change over time. Inflation of 2% would mean that something that you could purchase for £1 last year would cost you £1.02 this year. Because of this, inflation can mask effects when comparing expenditure across different years. To account for inflation, expenditure is calculated in constant prices. This adjusts expenditure in one year so that it is in another year’s prices. Constant 2022/23 prices are used when comparing across different financial years.

2.5 Comparisons over time: to other published statistics

Please note that these statistics are broadly similar to the Direct Expenditure with UK industry statistics published until 2009 in UK Defence Statistics, but should not be directly compared due to methodological differences.

The Cabinet Office produce statistics on procurement spend with SMEs, details on the differing methodologies can be found in the Background Quality Report.

Significant improvements have been made to the regional expenditure statistics estimation processes compared to the previous format. Years 2020/21 and 2021/22 have been revised and the time series in the new format of expenditure statistics should be used over the old format. For more details please see the Background Quality Report.

2.6 Accuracy

Several assumptions have been made during analysis of this data. For further information on these, and for more detailed explanations of the applications and limitations of this data, please refer to the Background Quality Report. To access all of the data in both current and constant prices please see the supplementary data tables.

Official Statistics publication

Our statistical practice is regulated by the Office for Statistics Regulation (OSR). OSR sets the standards of trustworthiness, quality and value in the Code of Practice for Statistics that all producers of official statistics should adhere to. You are welcome to contact us directly with any comments about how we meet these standards. Please contact us at Analysis-Publications@mod.gov.uk. Alternatively, you can contact OSR by emailing regulation@statistics.gov.uk or via the OSR website.

3. MOD Expenditure with UK industry

This section shows total UK industry spending in current and constant prices and outlines the changes in expenditure over time.

MOD Expenditure increased by 8% in 2022/23 after adjusting for inflation.

Total MOD expenditure in 2022/23 was £25.0 billion. This is an increase in spending both before and after adjusting for inflation. In real terms, expenditure increased by £1.8 billion from 2021/22. This is the highest expenditure reported since 2013/14, even after adjusting for inflation.

Figure 1: Total MOD Expenditure by Financial Year ^{[footnote 1]}

Source: Analysis Directorate (MOD)

Description of Figure 1: Line graph showing Defence expenditure with UK industry over time since 2013/14 in current (light purple) and constant (dark purple) prices. Total MOD expenditure reached £25.0 billion in 2022/23, an increase in both current and constant prices when compared to 2021/22.

4. MOD expenditure with UK industry by region

This section breaks down MOD expenditure with UK Industry across the 12 UK regions for the financial year 2022/23. It also explores changes in contracts and/or payments for specific projects at the regional level which may be explaining fluctuations in regional expenditure.

Increased overall MOD spending with UK industry has driven increases across most regions, with the biggest rise seen in Yorkshire and The Humber.

Of the 12 UK regions, 10 saw increases in expenditure since 2021/22. The only regions that did not were the East Midlands and Scotland. Expenditure in Yorkshire and the Humber more than doubled after it rose by more than £250 million. There is no particular contract that caused the increase in expenditure attributed to this region, but instead is a demonstration of the rise in suppliers which operate in the area. Wales (25%), Northern Ireland (20%) and London (13%) also saw relatively large increases in expenditure, since 2021/22. Wales saw an increase in payments towards contracts to support the delivery of AJAX Specialist Vehicles to the British Army, of which General Dynamics is the responsible supplier. In Northern Ireland, expenditure with industry rose by a further £31 million, which was largely driven by the continued increase in payments towards Thales UK Limited, primarily to assemble Next Generation Light Anti-Tank Weapon (NLAW) systems. There is no single reason for the increase in expenditure attributed to London, but instead is a demonstration of the inherent variability of contract data.

Figure 2: MOD Expenditure with UK Industry by Region 2022/23

Source: Analysis Directorate (MOD)

Description of Figure 2: Heat map of Defence Expenditure with UK industry by Region in 2022/23. Darker colours indicate higher regional expenditure. The top 3 regions with the highest expenditure were the South East (£6,350 million), followed by the South West (£5,930 million) and the North West (£3,060 million).

5. MOD Expenditure per person with UK industry

This section describes MOD average expenditure per person with UK industry. Expenditure per person is calculated by dividing the total MOD expenditure by the population of an area. This shows how much money is spent for each person living in that area. This is outlined for the UK as a whole and further broken down by UK region in 2022/23.

MOD expenditure per person was £370, the highest number reported in the past 10 years.

MOD average expenditure per person for the UK was £370 in 2022/23, which is the highest amount reported in the last 10 years. After adjusting for inflation, this has increased for a second consecutive year from £320 reported in 2020/21. Total expenditure since 2013/14 has increased by 8% whereas expenditure per person has increased by just under 3% over the same period after adjusting for inflation, with the difference being a result of the growing UK population.

The South West is the top ranked region for MOD spending, when regional population figures are considered. Due to denser population numbers in the South East, expenditure per person in the South West is 50% higher than that of the South East, which is in second place. Expenditure per person in the South West is just over 10 times greater than in Northern Ireland and Yorkshire and The Humber.

Figure 3: MOD Expenditure per person with UK Industry by Region 2022/23

Source: Analysis Directorate (MOD) and ONS Mid-year Population Estimates 2022

Description of Figure 3: Heat map of Defence Expenditure per person with UK industry by Region in 2022/23. Darker colours indicate greater expenditure per person. Expenditure per person was the highest for the South West (£1,020), South East (£680) and North West (£410).

6. MOD Expenditure with UK industry by Industry Group

This section presents MOD expenditure with a focus on five industry groups and its changes over time. It also examines reasons that may be driving the changes in expenditure according to the industry group.

Standard industrial classification (SIC) codes are collected on the MOD contract system and classify which specific industry a contract relates to. These SIC codes are grouped together into industry groups. Please note that typically only one SIC code is assigned to each contract, even though many contracts will involve multiple different industries. On some of the higher value contracts we have sought more detailed industry information, however for many contracts only a single code is available.

Expenditure in Weapons and Ammunition was £2.1 billion in 2022/23, a 76% increase compared to the previous year.

MOD expenditure in Weapons and Ammunition has increased by 76% in 2022/23, the highest this figure has been in the last 10 financial years. In real terms, this is an extra £906 million. In the last year, this sector has seen increased payments largely because of the UK’s support for Ukraine in their ongoing conflict, committing £2.3 billion in military and humanitarian assistance in 2022/23, according to the latest Integrated Review. Expenditure in Shipbuilding and Repairing increased again from last year by more than £1.0 billion (23%) in 2022/23. This is due to a £2.0 billion investment announced by the government to support the UK’s submarine delivery capabilities, as part of the current phase of Dreadnought. The Real Estate and Renting sector also saw a relatively large rise in expenditure, by 17% since 2021/22, an increase of £169 million. This is principally a result of an increase in support of housing development, a majority of which being allocated to local authority housing.

Figure 4: MOD Expenditure in Constant Prices By Industry Group ^{[footnote 1]}

Source: Analysis Directorate (MOD)

Description of Figure 4: Line graph showing Defence expenditure with 5 Industry groups since 2013/14. The largest increase in expenditure in 2022/23 was observed in Weapons and Ammunition (76%).

Note: ‘Technical, Financial Services and Other Business Services’ includes Financial Services, Business Services, Education, Health and other Service Activities.

7. MOD Expenditure with Small and Medium-sized Enterprises

This section describes the proportion of MOD expenditure with UK industry that is with Small and Medium-sized Enterprises (SMEs). SMEs are an entreprise or business with fewer than 250 employees and an annual turnover of less than €50 million. The results are outlined for the UK as a whole and further broken down by UK region in 2022/23.

5% of MOD Expenditure with UK Industry is with Small and Medium-sized Enterprises.

MOD direct expenditure with Small and Medium-sized Enterprises (SMEs) in the UK was just under £1.4 billion in 2022/23. Due to the nature of contract data, large fluctuations in expenditure with SMEs in each region year-on-year is expected, as variations will have a greater effect on the much smaller SME expenditure totals. The North East has the largest proportion spend with SMEs, at just under 13%. Yorkshire and the Humber and the West Midlands are second and third respectively.

Figure 5: MOD Expenditure with Small and Medium-sized Enterprises by Region 2022/23

Source: Analysis Directorate (MOD) and Dun and Bradstreet Solutions

Description of Figure 5: Horizontal bar chart showing the proportion of MOD expenditure with SMEs by region in descending order in 2022/23. Darker colours indicate a higher proportion of MOD expenditure with SMEs. The top 3 regions with the highest proportion of expenditure with SMEs were the North East (12.5%), Yorkshire and The Humber (11.2%). and West Midlands (10.7%)

8. MOD Expenditure with UK and Overseas Industry 2022/23

This section examines the breakdown in MOD expenditure between UK and overseas Industry. It explores the proportion of total MOD expenditure with industry that is attributable to expenditure within the UK or overseas and how it evolved over time.

In 2022/23, 89% of total MOD direct expenditure with industry was within the UK, with 11% attributed overseas.

The £25.0 billion total with UK industry only accounts for 89% of total MOD expenditure with industry and commerce. For example, large portions of spend on NETMA contracts will have spend attributed to overseas European NETMA partner nations. In total, £3.0 billion of MOD spend with industry and commerce is attributed to areas outside of the UK. Note that this expenditure excludes direct payments to foreign governments and spend via Foreign Military Sales (FMS) agreements with the US Government, details of which can be found in the Trade, Industry and Contracts bulletin.

Figure 6: MOD Expenditure with UK and Overseas Industry ^{[footnote 1]}

Source: Analysis Directorate (MOD)

Description of Figure 6: Stacked bar chart showing the split of MOD expenditure between UK and Overseas industry since 2013/14. 89% of total MOD expenditure with Industry in 2022/23 was attributable to expenditure within the UK. This number has been relatively stable over the past 3 financial years.

Note: Overseas spend excludes FMS data.

9. Methodology

This section sets out the data requirements and processes used to create the tables and charts in this bulletin. More detailed explanations of data sources, assumptions and methodologies used in this publication can be found in the Background Quality Report.

9.1 Sources

As well as using MOD expenditure data identified by MOD’s Contracting, Purchasing and Finance (CP&F) system and information from individual MOD project teams, additional input is required from data released by the ONS.

• Annual UK population estimates produced by the ONS.
• Dun & Bradstreet Solutions are used to source data on Small and Medium-sized Enterprises (SMEs).

9.2 Assumptions and Limitations

Various assumptions have had to be made throughout the process when concrete or reliable information was not available. These assumptions are listed in the Background Quality Report.

9.3 Regional Expenditure Figures

Location of Work (LOW) codes associated with HQ contracts are used to allocate expenditure to specific regions and calculate expenditure with UK industry. This expenditure is added to the Miscellaneous payments that have a UK postcode as the billing address. Expenditure with Other Government Departments (OGDs) and Trading Funds (TFs) are removed from both the HQ and Miscellaneous payments and added back in with improved location and work type information. This included expenditure with AWE, DIO, DSG/DECA, HRMS, JPA, NETMA, OCCAR and UKHO. Any electronic Procurement Card (ePC) expenditure is distributed based on the location of MOD personnel. Once combined, this provides a breakdown for MOD expenditure by region. This information is further presented as expenditure per person which is calculated using ONS mid-year population data. This is presented on choropleth maps to show expenditure in each region of the UK.

9.4 Industry Group Expenditure Figures

HQ contracts have SIC code information associated with them which identifies the type of work involved for each contract. MOD spending is aggregated over similar industries and used to calculate expenditure by industry group for these contracts. Miscellaneous payments have no SIC code assigned to them so the distribution of SIC codes from the HQ contracts is applied in this case. Expenditure against OGD or TF contracts that do not have a SIC code is distributed following discussion with project teams. Combining this expenditure we get a total figure for MOD expenditure by SIC group which is further aggregated into industry groups for presentation.

9.5 Small and Medium-sized Entreprises (SMEs) Expenditure Figures

Suppliers are classed as an SME or not according to the European Commission Definition as companies with an annual turnover of less than €50 million and fewer than 250 employees. These suppliers are identified from Dun and Bradstreet supplier information.

The Cabinet Office produce statistics on procurement spend with SMEs, details on the differing methodologies can be found in the Background Quality Report.

10. Glossary

Atomic Weapons Establishment (AWE) works under contract to the MOD and is responsible for national nuclear security and supporting the Continuous At Sea Deterrence (CASD) programme.

Commerce is defined as a business activity where goods and services are exchanged for value.

Constant Prices indicate a value from which the effects of inflation have been removed. A constant price refers to a year as the basis for the calculation, e.g. “constant 2022/23 prices”. This would mean that historic expenditure figures have been adjusted so that they are in 2022/23 prices and take account of the effects of inflation.

Contracting Purchasing and Finance (CP&F) provides a single online end to end procurement system for all MOD procurement activity. All other processes, especially paper-based systems, will be either replaced or subsumed.

Current Prices are when expenditure is presented without removing the effects of inflation. This can cause difficulties when comparing expenditure across different years as inflation affects the value of a currency.

Defence Electronics and Components Agency (DECA) is a government organisation dedicated to maintenance, repair, overhaul, upgrade and procurement in defence avionics, electronics and components.

Defence Infrastructure Organisation (DIO) is responsible for the day-to-day estates activity at the MOD including maintenance, construction and sustainability of rural and built MOD estates.

Defence Support Group (DSG) was a former Trading Fund of the MOD created following the merger of Army Base Repair Organisation (ABRO) and Defence Aviation Repair Agency (DARA) on 1 April 2008. On 1 April 2015 the land repair and maintenance business was sold to Babcock. The remaining part of the business, the Air division and Electronics and Components division, stayed under MOD ownership as DECA.

DEFFORM 57 Completion of this form was mandatory for all contracts where Defence Business Services (DBS) were the payment authority. It was used to set up a contract with DBS for payment purposes and was an important source of capturing data on contract activity within the Ministry of Defence. The form has now been subsumed into CP&F as data is input directly to the system by Commercial Officers.

electronic Procurement Card (ePC) is the first choice purchasing tool for goods and services, which are not covered by contractual arrangements and allows individual units to process mainly small value purchases. The cards are issued and monitored by the responsible Finance team.

HQ Contracts are formal contracts set up by MOD Core Department which were previously set up by a DEFFORM 57. Details of HQ contracts are now recorded within CP&F with the data being input directly by Commercial Officers.

Human Resources Management System (HRMS) is a personnel administration system for civilians working at the MOD.

Industry is defined as an economic activity concerned with the procurement and processing of raw materials into finished products.

Industry Groups are 22 groups based on the Standard Industrial Classification (SIC) 2007 guidelines maintained by the Office for National Statistics (ONS). Industry groups combine SIC codes that are related to similar types of activity. A breakdown of which SIC codes belong in each industry group can be found in the accompanying data tables to this publication.

International Territorial Levels (ITL) Level 1 Regions are 12 UK regions used in the production of statistics.

Joint Personnel Administration (JPA) is a personnel administration system used by the British Armed Forces.

Location of Work (LOW) Codes are entered on to the DEFFORM 57 or CP&F system, and indicate where work for a contract is being carried out. There are many codes for different areas of the UK and these have been amalgamated to identify the regions being reported on.

Ministry of Defence (MOD) is the United Kingdom government department responsible for implementation of government defence policy.

Miscellaneous Payments are the payment method employed by DBS Finance (MOD’s primary bill paying authority) for running service items such as the provision of utilities. These items are covered by “miscellaneous” transactions, where no MOD HQ Contract exists. These agreements for goods or services will have been set up locally between the MOD Branch and the supplier and are legally binding.

NATO Eurofighter and Tornado Management Agency (NETMA) is the prime contractor for the Eurofighter Weapon System. The arrangements for the management of the Eurofighter programme were set out in the NATO Charter dated 18 December 1995, in which the international management agencies of the Tornado and Eurofighter programmes were integrated into a single agency, NETMA. This NATO agency is essentially a multi-nation HQ project office for these two collaborative projects, involving the UK, Germany, Italy and Spain. In the UK, Eurofighter is now called ‘Typhoon’.

Office for National Statistics (ONS) is responsible for the production of a wide range of independent economic and social statistics. The statistics are there to improve understanding of the United Kingdom’s economy and society, and for planning the proper allocation of resources, policy-making and decision-making. It is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK Government’s single largest statistical producer.

Organisation Conjointe de Coopération en Matière d’Armement – the Organisation for Joint Armaments Co-operation (OCCAR) was originally set up in November 1996 by France, Italy, Germany and the UK with the aim of improving the efficiency and lowering the cost of managing co-operative defence equipment programmes involving European nations (e.g. A400M). Belgium and Spain are now also members.

Other Government Departments (OGDs) refers to government departments outside the MOD that the MOD spends money with.

Small and Medium-sized Enterprises (SMEs) refers to an enterprise or business with fewer than 250 employees and an annual turnover of less than £50 million.

Standard Industrial Classification (SIC) Codes classify business establishments and other statistical units by the type of economic activity in which they are engaged. The classification is maintained by the ONS.

Trading Funds (TFs) were introduced by the Government under the Trading Funds Act 1973 as a “means of financing trading operations of a government department which, hitherto, have been carried out on Vote”. They are self-accounting units that have greater freedom, than other government departments, in managing their own financial and management activities. They are free to negotiate their own terms and conditions with their staff. For this reason, their grading structures do not always match that of the rest of the Ministry. From 2017/18 there is now only one MOD Trading Fund - UK Hydrographic Office.

UK Hydrographic Office (UKHO) was formed as a Trading Fund of the MOD in 1996 and is responsible for the provision of global hydrographic products and services to UK Defence and commercial mariners. In addition, UKHO discharges the UK’s obligation to provide hydrographic products and services needed for safe navigation in UK waters.

11. Further information

11.1 Symbols

Figures marked with ^p are provided as provisional estimates.

Figures marked with ^r are revised from the previous edition.

Data visualisations marked with “//” indicate there is a break in the data series. Surrounding commentary will declare the impact on the figures and whether the break in series arises from a data issue, or a change in methodology or process.

11.2 Rounding

Where rounding has been used, totals and sub-totals have been rounded separately and so may not equal the sums of their rounded parts. Total expenditure figures have been rounded to the nearest £ million, and per person expenditure figures have been rounded to the nearest £10.

11.3 Revisions

Corrections to the published statistics will be made if errors are found, or if figures change as a result of improvements to methodology or changes to definitions. When making corrections, we will follow the Ministry of Defence Statistics Revisions and Corrections Policy. All corrected figures will be identified by the symbol ^r, and an explanation will be given stating the reason and size of the revision. Corrections which would have a significant impact on the utility of the statistics will be corrected as soon as possible, by reissuing the publication.

11.4 Contact Us

The Analysis Directorate welcomes feedback on our statistical products. If you have any comments or questions about this publication, or about our statistics in general, you can contact us as follows:

Analysis Directorate (Analysis-Expenditure)

Telephone: 030 015 86554

Email: Analysis-Expenditure-PQ-FOI@mod.gov.uk

If you require information which is not available within this or other available publications, you may wish to submit a Request for Information to the Ministry of Defence under the Freedom of Information Act 2000.

If you wish to correspond by mail, our postal address is:

Analysis Directorate (Analysis-Expenditure)
Ministry of Defence
Oak 0 West, #6028
MOD Abbey Wood North
Bristol
BS34 8QW

For general MOD enquiries, please call: 020 7218 9000

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1. The break in series highlighted from 2020/21 is the result of a change in the methodology used to produce the regional expenditure estimates. Comparisons across financial years 2019/20 and 2020/21 should not be made but longer term comparisons across the timeseries should still be valid. More details can be found in the Background Quality Report. ↩ ↩² ↩³