In this Ai Defence Journal Insights Report we read the ‘BAE Systems Contribution’ report. The ‘BAE Systems Contribution’ report comes soon after the UK’s Strategic Defence Review was announced at BAE Systems’ site in Glasgow, where the Prime Minister outlined a plan to create: “A defence dividend – that will be felt in the pockets of working people and the prosperity of the country, securing growth for generations to come.”

BAE Systems, as the UK's largest defence, aerospace, and security company, plays a crucial role in safeguarding national security and significantly fueling the UK economy. In 2024, its operations supported 159,600 jobs and added £13.7 billion to the country’s GDP. The company is a major investor in the UK's defence industrial base, focusing on sovereign capabilities, technological innovation, and extensive supply chain engagement. BAE Systems' impact extends beyond economic metrics to include substantial investments in skills development, community initiatives, and environmental management across various regions of the UK.

Main Themes and Key Impacts

1. Economic Impact and Contribution to GDP & Employment

BAE Systems demonstrates a substantial economic footprint across the UK through direct operations, supply chain procurement, and employee spending.

• Total GDP Contribution: In 2024, BAE Systems contributed an estimated £13.7 billion to the UK's GDP, equivalent to 0.5% of the national economy. This includes:
• Direct contribution: £4.2 billion
• Indirect impact from procurement: £4.8 billion
• Induced impact from wage spending: £4.7 billion
• "For every £100 contributed to GDP directly by the Company, a total of £325 was supported across the economy."
• Total Employment Supported: BAE Systems supported 159,600 full-time equivalent (FTE) jobs in the UK in 2024. This breaks down into:
• Direct employees: 49,600
• Indirect employment (supply chain): 60,600 workers across 5,800 suppliers
• Induced employment (wage spending): 49,400 workers
• "For every 100 FTE jobs at BAE Systems, the Company supported a total of 320 jobs in the UK economy as a whole."
• Procurement Spending: In 2024, BAE Systems spent £5.8 billion with its 5,800 UK suppliers, highlighting a diverse and extensive supply chain.

2. Strategic Importance to UK Defence and Sovereign Capabilities

BAE Systems is central to maintaining the UK's sovereign defence capabilities and industrial base.

• Largest Defence Supplier: The company is the "largest defence, aerospace and security company in the UK and in Europe," and the "largest supplier to the UK’s Ministry of Defence in terms of annual spend."
• Sustaining Skills and Expertise: BAE Systems helps "maintain the UK’s sovereign defence capabilities by developing and sustaining scientific, technological and manufacturing skills." This is crucial given that "when workers exit a defence business, the vast majority are lost to the sector as a whole."
• "Always On" Munitions Production: The company is significantly investing in its UK munitions facilities (Glascoed, Washington, Radway Green) to enable an "always on" production capacity, capable of scaling up rapidly. For example, the new melt-cast facility at Glascoed will deliver "up to a 16-fold increase in production of 155mm shells."
• Critical National Infrastructure: BAE Systems develops and manufactures essential platforms like the Typhoon combat aircraft, Type 26 frigates, and all Royal Navy submarines, including the new Dreadnought-class ballistic missile submarines and SSN-AUKUS submarines.

3. Technology Development, Innovation, and R&D Investment

BAE Systems is a key driver of innovation in critical technologies for defence and security.

• Significant R&D Investment: The company carried out £1.3 billion worth of R&D work in 2024, amounting to £6.8 billion over the five years to 2024. This represents "56% when considering R&D performed by UK businesses related to defence specifically."
• Accelerating Critical Technologies: BAE Systems invests in developing advanced technologies such as quantum, artificial intelligence, advanced materials, autonomous systems (e.g., Nautomate for maritime vessels, Herne XLAUV), and secure battlefield networks (TRINITY).
• University and SME Partnerships: The company spent £25 million on research at universities in the UK in 2024, including strategic partnerships with six universities. It also collaborates with SMEs, exemplified by the acquisition of Malloy Aeronautics for heavy lift UAS and partnership with Cellula Robotics for the Herne XLAUV.
• Patent Activity: BAE Systems was the "sixth highest in the UK in terms of the number of international patent applications filed in 2024," safeguarding intellectual property and sovereign defence capabilities.

4. Investing in People and Communities

Beyond direct economic contributions, BAE Systems makes significant social investments.

• Skills Development: The company has a projected investment of £1 billion in education and training between 2020 and 2025. In 2024 alone, it spent £230 million on skills development and education, including £200 million to train 4,650 apprentices and over 1,000 graduate employees and university placement students.
• Community Investment: In 2024, BAE Systems contributed £2 million to local and national charities and non-profit organizations. This includes support for education, armed forces and heritage, and local community initiatives.
• Armed Forces Covenant: BAE Systems has maintained a Gold Award in the Ministry of Defence’s Employer Recognition Scheme since 2014, promoting recruitment for veterans and service leavers and encouraging supply chain partners to support the armed forces community.
• Environmental Management: The company is implementing a renewable energy strategy, with solar panels at sites like Samlesbury and Glasgow, contributing to reduced carbon footprints.

5. Regional Impact Across the UK

BAE Systems' operations are geographically dispersed, supporting employment and economic activity in various regions, including some deprived areas.

• North West of England: Home to 57% of BAE Systems' UK employees (26,500 direct employees), supporting a total of 48,400 jobs. Key sites include submarine design and build at Barrow-in-Furness (12,300 direct employees, supporting 16,100 jobs), and Air sector operations at Warton and Samlesbury.
• Barrow-in-Furness: Over £1 billion invested in the shipyard since 2013 for Dreadnought submarines.
• London and the South East: Supports a total of 31,900 jobs, with significant operations in Portsmouth (warship support), Rochester (electronic and electrical systems, including Striker II Helmet-Mounted Display), and various Digital Intelligence sites in London, Guildford, and Alton.
• Procurement: £1.6 billion spent with 1,650 businesses in the region.
• Scotland: Focus on shipbuilding in Glasgow (Govan and Scotstoun shipyards), with 4,500 direct employees supporting a total of 14,000 jobs across Scotland.
• Investment: A £300 million investment is modernizing shipbuilding facilities in Glasgow for the Type 26 frigates.
• North East of England, Yorkshire and the Humber: Key sites for munitions production (Washington, Ridsdale) and a new £25 million artillery factory in Sheffield creating 200 highly skilled jobs. Supports a total of 12,000 jobs.
• Wales: Munitions factory in Glascoed, Monmouthshire, is the largest site, supporting a total of 4,900 jobs in Wales. Significant investments are being made to accelerate manufacturing capability there.
• South West of England: Operations spread across different military domains, including software development in Yeovil and Christchurch, and Digital Intelligence offices in Gloucester and Ross-on-Wye.

Conclusion

The Oxford Economics report clearly demonstrates that BAE Systems is a vital pillar of the UK economy and a cornerstone of its national security. Its extensive operations, significant investments in R&D and skills, and broad supply chain engagement create substantial economic value, employment, and contribute to the long-term prosperity and resilience of communities across the UK. The company's commitment to developing sovereign defence capabilities and advanced technologies ensures the UK and its allies remain at the forefront of global security.