RS67983 BAE Report171117 Digital

THE
CONTRIBUTION
OF BAE SYSTEMS
TO THE UK
ECONOMY
NOVEMBER 2017
The contribution of BAE Systems to the UK economy
TABLE OF CONTENTS
Foreword 2
Executive summary 4
1. Employment contribution 11
1.1 Total employment contribution 11
1.2 BAE Systems’ own employment 11
1.3 Skills base 18
1.4 Supply chain contribution 24
1.5 Consumer spend contribution 26
2. GDP contribution and productivity 28

2.1 Total GDP contribution 28
2.2 Direct GDP contribution 29
2.3 Supply chain contribution 31
2.4 Consumer spend contribution 33
3. Tax contribution 36
4. Wider impact 40
4.1 Exports 40
4.2 Capital investment 42
4.3 Technology and R&D 44
5. Regional contribution 52
5.1 Central Belt of Scotland 52
5.2 South Cumbria 58
5.3 North West 62
5.4 South 66
6. Conclusion 73
7. Appendix A 74
8. Appendix B 77
1
FOREWORD
BAE Systems plays a critical billion worth of goods and
role in ensuring the security services last year—equivalent
and prosperity of the United to almost 1 percent of UK
Kingdom. We are the nation’s exports—aligning with the
largest defence, aerospace UK Government’s push for a
and security company and growth in exports.
deliver some of the largest and
most technically advanced Our activities sustained nearly
engineering and manufacturing 130,400 full-time equivalent
projects in the world, keeping jobs in the UK. For every 100
countries, their people and jobs at BAE Systems, we
infrastructure secure. Our supported 380 jobs in the
impact is felt across the UK economy as a whole.
and we are present in most
regions, with more than 50 Our ongoing investments
sites throughout the country. in training, skills, new
technologies and ways of
Together with the 8,900 working have played a vital role
companies in our UK supply and we are justifiably proud
chain, our activities make a that our people were almost 80
significant contribution to the percent more productive than
UK’s national and regional the national average in 2016.
economies, the technology We continue to drive, however,
sector and the fabric of UK for continuous improvement
society—by providing unrivalled and greater efficiency across
skills, training and opportunities our operations, recognising
for social mobility. We create that we are entitled to nothing
highly skilled jobs, invest in and that our future success
research and development, and depends on our ability to hone
generate significant exports our competitive edge and offer
and tax revenues. our customers ever greater
value for money.
We commissioned Oxford
Economics to quantify I am personally proud to
this contribution to the UK be Chairman of a company
economy and to provide an that makes such a major
independent analysis. contribution to the economy
and safety of the nation. As
The resulting report shows that the UK seeks to expand into
our operations, including the new export markets and to
direct, indirect and induced grow in the technology sector,
impacts, supported an £11.1 BAE Systems looks forward to
billion contribution to UK playing a major role.
GDP in 2016, representing 0.6
percent of total GDP. In turn
this helped to sustain a £2.5 Sir Roger Carr
billion tax contribution to the Chairman, BAE Systems plc
Exchequer. As part of this
contribution, we exported £4.7
2
The contribution of BAE Systems to the UK economy The contribution of BAE Systems to the UK economy
EXECUTIVE SUMMARY
130,400
BAE Systems is the largest defence and security company BAE Systems’ labour productivity is very high, reflecting
80%
in the UK and the third largest globally. It makes a huge the Company’s considerable investment in its staff, capital
contribution to some of the greatest engineering and and R&D. The productivity of the Company’s workforce, as
manufacturing projects in the world and is one of the largest measured by gross value added per FTE worker, was almost 80
Total full-time equivalent manufacturing employers in the UK. BAE Systems’ UK activities percent higher than the national average in 2016, at £128,000 more productive than
(FTE) jobs supported by are wide-ranging, across Air, Land, Sea and Cyber. The Company per FTE employee. This reflects how skilled its workforce is: the national average
BAE Systems in 2016 operates around 50 sites of its own across the country, as well some 64 percent of its staff are employed in engineering or
as having personnel embedded alongside its customers. engineering-related roles. The importance of this skills base
to the Company’s success is reflected in its recruitment and £128,000 gross value added
For every 100 jobs at BAE Systems, This report focuses on the contribution that BAE Systems training efforts. As of November 2017, BAE Systems had over per FTE worker in 2016.
380 are supported in made to the UK economy in 2016. Its impact is assessed in two 1,600 apprentices in training, just under 500 graduates, and this
the economy as a whole. stages: the Company’s immediate economic footprint, measured year provided more than 100 summer internships.
in terms of the jobs, GDP and the tax receipts supported; and
the wider economic impact that stems from its operations. In 2016, either directly or through secondary channels, the
£4.7 bn
In particular, we explore the impact of its exports, its capital Company supported a total tax contribution of £2.5 billion to
£11.1 bn
spending, and its research and development (R&D) investment. the UK Exchequer. Some £620 million was directly generated
BAE Systems’ impact is firstly explored at a national level, and by BAE Systems itself; this included national insurance
then we present an in-depth regional analysis focusing on four contributions paid by both the Company and its employees, Value of goods and
geographies: the Central Belt of Scotland, South Cumbria, the income tax and corporation tax. To give an indication of services exports
Total gross value added North West and the South of England. scale, £2.5 billion in tax revenues is sufficient to pay for the
contribution to UK GDP departmental budgets of the Foreign and Commonwealth Office
in 2016 by BAE Systems In 2016, we estimate that BAE Systems sustained nearly and the Cabinet Office combined.1 This was equivalent to almost one
130,400 full-time equivalent (FTE) jobs in the UK—equivalent percent of UK exports in 2016.
to one in every 207 FTE jobs in the country. This contribution is BAE Systems’ economic footprint extends far beyond its core
Of this figure, £4.4 billion is the sum of three impact channels: direct on-site jobs; indirect economic impact, to the wider benefits its activities bring
directly contributed by the jobs within the Company’s UK supply chain; and the induced to UK economy and society. These range from promoting UK
Company’s activities. employment effect that results as employees of BAE Systems exports to its significant investments in R&D and the spillover
and its suppliers spend their wages in the wider consumer benefits that arise from that. These wider impacts can be
economy. The Company itself employed 34,600 people on difficult to quantify in monetary terms, as their positive effects
an FTE basis in 2016, while a further 95,800 FTE jobs were can materialise over a number of years and may be spread
supported through the indirect and induced channels. This widely through many different parts of the economy.
demonstrates that the Company’s impact reaches far beyond
its own operations; for every 100 jobs at BAE Systems, the In 2016, BAE Systems exported £4.7 billion worth of goods
Company supported 380 jobs in the UK economy as a whole. and services—equivalent to almost one percent of UK exports
in that year. Netting off imports, this means the Company made
In total, the Company’s operations are estimated to have a positive contribution to the UK balance of payments of £3.6
supported an £11.1 billion contribution to UK GDP in 2016. billion through its servicing of foreign markets. This aligns with
This is equivalent to 0.6 percent of the country’s entire the UK Government’s push for a growth in exports by 2020—a
economic output. Of this, BAE Systems itself contributed £4.4 goal which BAE Systems is well placed to support.
billion, while supply chain and worker spending multiplier effects
supported a further £6.7 billion. In other words, for every £1
in GDP created directly by BAE Systems, a total of £2.50 is
supported across the UK economy as a whole. This means that
BAE Systems contributed 57 pence in every £100 of UK GDP in
2016, either directly or through multiplier effects.
4 1
HM Treasury, “Spring Budget 2017”, March 2017. 5
BAE Systems also makes a substantial contribution to the
£4.4 bn
UK wider economy through its capital investments and its
expenditure on R&D. In 2016, capital investment totalled £222
million, while its R&D investment, including investment from the
Investment in R&D in the UK Ministry of Defence, was more than £1.0 billion in the UK. There
over the past five years is strong empirical evidence that R&D investment generates
wider benefits for society, over and above those which accrue
to the investor itself. Over the past five years, the Company’s
BAE Systems has R&D investment totalled £4.4 billion in the UK, underpinning the
more than 1,600 granted development of some highly innovative products. BAE Systems
patents worldwide. also invests in important university partnerships with Cranfield
University, and the Universities of Birmingham, Manchester,
Southampton and Strathclyde, and has just over 1,600 granted
patents worldwide. In 2016, the European Patent Office ranked
BAE Systems as the fourth largest UK applicant.
The economic impact of BAE Systems is widely spread around

the UK. The Company’s operations span the length and breadth
of the UK, from Scotland to the south coast, and hence directly
contribute to local economies across most UK regions, from
north to south. Not only are the Company’s direct operations
spread across a number of locations; its suppliers and staff
are also widespread around the country, leaving few places
untouched by the economic value it generates. In fact, BAE
Systems’ activities generate economic value in 382 of the 391
local authority areas across the UK.
HMS Westminster undergoing

maintenance at HM Naval
Base Portsmouth.
6
INTRODUCING ECONOMIC
IMPACT ANALYSIS
Fig. 1: Illustration of channels of economic impact
The economic impact of a company or industry is Economic impact assessments traditionally
measured using a standard means of analysis called only consider the activity that is generated
an economic impact assessment. This involves by the operations of a given business, but
the quantification of the three ‘core’ channels of BAE Systems’ economic footprint also BAE Systems employs
DIRECT staff and its operations
impact that comprise the organisation’s ‘economic extends to the considerable contribution IMPACT generate GDP and tax for
footprint’, consisting of: that it makes to workforce development, the authorities.
as well as its R&D investment, the exports
• Direct impact, which relates to the economic it generates and its transfer of industrial
benefit of BAE Systems’ operations and capabilities to local small companies. This
activities in the UK; study qualitatively examines these wider
• Indirect impact, which encapsulates impacts arising elsewhere in the economy.
the economic benefit and employment
supported in the firm’s supply chain as a The modelling on which this report is based
INDIRECT
result of its procurement of goods and computes the economic footprint of IMPACT
services; and BAE Systems in the UK in 2016, the latest year
It also spends money with
• Induced impact, comprising the wider for which full economic data were available at suppliers who employ staff
economic benefit that arises when the time of writing. The inclusion of the cyber and generate GDP and pay taxes.
employees within BAE Systems and security and intelligence business represents a They use other suppliers in turn.
its supply chain spend their earnings, change since our previous analysis and implies
for example, in local retail and leisure that this year’s figures cannot be directly
establishments. compared with results from our earlier study.
Using these pathways, a picture of BAE Systems’ Economic contributions are shown for
economic footprint is presented, using three the whole UK economy and employment
metrics: contributions are shown for four regions: the
INDUCED
Central Belt of Scotland, South Cumbria, the IMPACT
• GDP, or more specifically, BAE Systems’ gross North West and the South. The definitions of
value added (GVA) contribution to GDP; the geographies are broadly the same as the Employees at BAE Systems and its
suppliers spend their wages in
• Employment, as the number of people ones used in our 2015 study, with the exception the wider economy, generating
employed, measured on a full-time equivalent of the Central Belt of Scotland, where the more GDP, jobs and tax.
(FTE) basis; and, definition has been expanded. However, an
• Government revenues, including important difference with our previous work
employment and corporate income taxes is the fact that this study assesses the local
paid to the UK Exchequer. impact of BAE Systems as a whole, rather than
Added together, these three effects—direct, indirect and induced—comprise the total economic impact
the local impact of BAE Systems’ local sites. of BAE Systems.
This change provides a more comprehensive
TOTAL
estimate of the economic value generated by IMPACT
BAE Systems in each region. This also means it
is not comparable to the 2015 results.
Further detail about the economic impact

methodology is included in the technical
appendix found at the end of this report.
In addition, BAE Systems’ activities have wider effects,

WIDER boosting activity elsewhere in the economy. These—
IMPACT such as R&D investment or exports—represent the wider
benefits that governments, consumers and society derive.
8 9
1. EMPLOYMENT CONTRIBUTION
130,400
This section describes 1.2. BAE SYSTEMS’ OWN
BAE Systems’ employment EMPLOYMENT
contribution in 2016. Besides
reviewing the three channels BAE Systems itself is a
of impact, we also examine major UK employer: in 2016, Total full-time equivalent (FTE)
the skills composition of its it employed almost 34,600 jobs supported by BAE Systems
workforce. All employment people on a FTE basis at
figures presented are in full- its UK sites (or 35,000 on a
time equivalent terms, unless headcount basis), comparable 34,600 FTE employees at
otherwise specified. to major UK employers such BAE Systems, 59,900 employees
3
as Network Rail. This was over in the Company’s supply chain and
1.1 TOTAL EMPLOYMENT a third of BAE Systems’ global 35,900 jobs supported through
CONTRIBUTION employment and made the the consumer spending channel.
Company one of the largest
The presence of BAE Systems manufacturing employers in
3.8
stimulates employment the UK. To put this figure into
across the UK through several context, BAE Systems’ UK
channels; the Company workforce was similar in size
employs people directly, to that employed across the BAE Systems’
purchases goods from UK UK in the manufacture employment multiplier
suppliers and pays wages of iron and steel combined
which are spent in domestic (31,500 people in FTE terms)
retail and leisure outlets. Each or the manufacture of basic For every 100 FTE jobs at the
of these generates jobs. pharmaceutical products Company itself, a total of 380
are supported across the UK as
4
(34,800 people in FTE terms).
In 2016, including all impact a whole.
channels, BAE Systems
supported around 130,400
full-time equivalent (FTE) Fig. 2: BAE Systems’ contribution to employment in the UK, 2016
jobs in the UK. The Company
employed 34,600 FTE
employees at its UK sites in
2016. This direct employment
Employment (FTE)
contribution was supplemented
140,000
by ‘indirect’ employment within 130,400
BAE Systems’ supply chain 120,000

35,900 35,900
and ‘induced’ employment as 100,000
a result of workers’ spending 80,000
(Fig. 2). These findings mean 59,900 59,900
60,000
that BAE Systems had an
employment multiplier of 3.8: 40,000
for every 100 FTE jobs at the 20,000 34,600 34,600

Company itself, a total of 380 0
are supported across the UK as Direct Indirect Induced Total
2
a whole.
F-35 production underway at Source: Oxford Economics

the advanced manufacturing
centre at BAE Systems’
Samlesbury site in Lancashire.
2
The 380 includes jobs within BAE Systems, plus those which result from indirect and induced multiplier effects. 11
3
Network Rail Limited, “Annual report and accounts 2016”, 2016.
4
Standard Industrial Classification of Economic Activities (SIC codes): 24.1-3 Manufacture of basic iron and steel and 21.0 Manufacture
Of Basic Pharmaceutical Products And Pharmaceutical Preparations.
The great majority of greatest concentration of

BAE Systems’ employees BAE Systems’ employees is
live in the areas surrounding Barrow-in-Furness, Cumbria,
the Company’s sites, with where some 5,600 FTE staff
the largest concentrations in members live. A further 1,800
the North West, (17,200 FTE FTE employees live in Fylde,
staff members), followed 1,800 live in Preston, and
by a further 7,200 FTE 1,600 live in South Ribble,
employees residing in the Lancashire (Fig. 3).
South East. Among the local
authority districts with the
Fig. 3: Home locations of BAE Systems’ employees, 2016
Number of FTE employees

living in local authority area
1-50
51-100
101-500
501-1,000
>1,000
BAE Systems’ sites
Astute-class submarine
Source: Oxford Economics, BAE Systems manufacture at BAE Systems
in Barrow-in-Furness.
12
LEADING-EDGE ELECTRONICS
EXPERTISE IN ROCHESTER, KENT
From digital helmet-mounted by a robust early careers design process and allows
displays to cutting-edge programme that includes students to follow a project
flight controls, employees in an advanced apprentice from specification definition,
Rochester, Kent, design, develop programme and a graduate through concept design, to
and produce some of the development programme. the manufacture of a working
world’s most advanced avionic prototype. This year the
equipment for both commercial These talented staff work to Company sponsored three
and defence customers. The develop innovative solutions local schools. An industrial
site also provides aftermarket needed by the military. For mentor—one of Rochester’s
support and repair services example, the site’s workforce graduates—was allocated to
for aircraft fleets around the developed the new Striker II each team of up to six Year 12
globe, making up more than 30 helmet-mounted display (HMD) students who had shown an
percent of the work performed that offers pilots exceptional interest in STEM subjects to
at the facility. Additionally, night-vision and target-tracking provide support and advice for
employees in Rochester deliver technology. The Striker II builds the duration of the project.
and support hybrid propulsion on the existing Striker HMD,
systems that power over which has decades of combat- As well as its direct impact,
1,200 buses in the UK and proven experience on Typhoon the site is well integrated into
more than 2,500 buses across and Gripen aircraft. the local supply chain. The
Europe. The use of advanced Rochester site spent some
electrification technologies Locally, BAE Systems’ £74.8 million with domestic
is designed to improve the Rochester site is vital. It is the suppliers in 2016. The majority
efficiency and performance of largest private employer in the of this expenditure was on
vehicles and vessels, saving on local area, and it is committed electronic components,
the cost of fuel, operations and to a strong community particularly crystal oscillators/
maintenance while reducing the investment programme amplifiers, which made up
impact on the environment. focussed on Science, over £10.6 million of the site’s
Technology, Engineering and procurement spending.
Delivering its innovative Maths (STEM) education,
products, the BAE Systems support for military families, Some 1,310 FTE jobs were
workforce in Rochester and local heritage projects. sustained by the site in 2016,
comprises highly skilled Every year BAE Systems’ with a total wage bill of over
scientists, engineers and Rochester site sponsors £51.3 million. Approximately
manufacturing staff, as well three teams to take part in 700 FTE employees lived in the
as individuals with niche skills The Engineering Education Medway local authority area
such as those trained in optics. Scheme. Established in and a further 170 in Maidstone.
The site is working hard to 1984 by the Engineering
ensure skills like these are being Development Trust, the
retained and grown within the programme provides Year
business and the local area— 12 students with in-depth
with a goal to attract highly experience of the real-life
skilled apprentices, graduates working applications of
and engineers to the Medway science, engineering and
local area. technology, enabling them to
make an informed decision
At present, the site employs about their future studies
approximately 1,310 FTE and career. The scheme
employees, supported introduces the engineering
The Striker II
helmet-mounted display.
14
MILITARY VEHICLE DEVELOPMENT

IN TELFORD, SHROPSHIRE
The focus of BAE Systems’ A related area of specialism for As well as its direct impact—
Telford site in Shropshire the Telford site is its bridging employing 280 FTE staff, of
is predominantly military expertise. From Telford, whom nearly 110 are engineers
vehicle engineering, support, BAE Systems has supplied and and over 40 are in operational
development and testing, supported the British Army’s roles—the site is well integrated
reflecting its location at the current bridging system, BR90, into the local supply chain,
heart of the West Midlands’ for nearly 30 years. The system and consequently its indirect
automotive industry. It is is both rapidly deployed and impact can be expected to
home to a specialist electro- flexible, providing the British be substantial. The site’s main
magnetic vehicle testing Army with a unique gap-crossing suppliers are based in the
facility and vehicle test capability. Telford’s 50-strong West Midlands, where the
track as well as a heavy specialist military bridging Company spends over £6.6
armour workshop and a team operates Europe’s most million annually. The majority of
3D visualisation dome. It advanced bridge test facility, this expenditure is on technical
continues to support the accommodating structures of services, components for vehicle
majority of the current
Armoured Fighting Vehicle
up to 62 metres in length and
a static load capacity of 220
assembly including an increasing
number of Additive Layer MUNITIONS MANUFACTURING IN
fleet of the British Army
including Challenger 2, Warrior
and CVR(T) as well as combat
tonnes. The facility is designed
to support BAE Systems’ work
with the Ministry of Defence,
Manufactured—or 3D printed—
parts and facilities management. GLASCOED, MONMOUTHSHIRE
engineer vehicles such as for example, on the bridging
Titan, Trojan and Terrier. upgrade programme, TYRO. BAE Systems and its Overall, BAE Systems paid administration building,
predecessors have operated a almost £19.5 million in wages technology and development
munitions manufacturing site to its staff at this site in centre and laboratories.
at Glascoed, Monmouthshire, 2016. Most of these staff live Further, a wellbeing centre
since the Second World War. locally in Monmouthshire, with canteen, gymnasium,
Its establishment in that part or the nearby districts of sports centre, and meeting
of South Wales reflected the Torfaen and Caerphilly. This and conference facilities has
region’s prevailing wet and wage bill, in turn, generates been built to provide for the
cloudy climate, suitable for a substantial induced impact workforce. Lastly, what was
a munitions factory. Even in the local economy as staff the old fire station has been
now munitions can only be spend their wages. transformed into a heritage
made in humid conditions. centre in order to engage the
Consequently, the location of BAE Systems continues to wider community with the
the site is unusually rural, and invest in Glascoed—in the last important role that Glascoed
this means its impact in the few years the Company has has had over many decades.
local employment context is spent £48 million upgrading
particularly critical. facilities in order to maintain
Glascoed’s position at the
Glascoed’s primary local forefront of world-class
impact comes from the mainly munitions manufacture. The
skilled, production-based jobs investment includes new
it provides. In total, there were manufacturing machines and
nearly 590 FTE roles based facilities—for example, the
at Glascoed in 2016. Of these, Automated Medium Calibre
250 were engineering-related Assembly Machine and Cased
operational roles and 110 Telescoped Ammunition
were engineers. facility—as well as a new
16 17
1.3 SKILLS BASE BAE Systems’ highly skilled

workforce is fundamental to
BAE Systems provides maintaining the firm’s role at
employment right across the the forefront of the defence
skills spectrum, in roles ranging and security industries. This
from engineers, to operational not only benefits BAE Systems
staff, to management (Fig. 4). itself, but also helps to expand
The Company’s workforce is and transfer the know-how
generally highly educated and of the UK defence industry
skilled, as demonstrated by the worldwide. For this reason,
high proportion of employees maintaining the quality of
in technical roles, most notably the workforce is a priority for
in engineering. In 2016, BAE Systems, which invests
BAE Systems employed substantially in its recruitment
almost 22,200 FTE processes and training, as
workers in engineering and exemplified by the Company’s
engineering-related roles graduate and apprenticeship
in the UK. The Company’s programmes. As of November
10,600 FTE engineers fulfilled 2017, BAE Systems had over
roles including Electrical 1,600 apprentices in training,
Design, Mechanical Design, just under 500 graduates, and
AWARD-WINNING
Software Engineering, this year provided more than
Structural Engineering, 100 summer internships.
APPRENTICESHIPS
Safety Engineering, Systems
Engineering, Weapons
Engineering and Naval
Architecture. A further Fig. 4: Share of employment in each job function at BAE Systems has offered BAE Systems also offers In October 2013, the
11,600 FTE employees BAE Systems, 2016 high quality engineering and degree apprenticeships, Government launched the
worked in operations, business management training with separate courses in Trailblazers initiative, with the
aircraft maintenance and through apprenticeships for aerospace, software and objective of ensuring that
manufacturing. The firm’s many years. Apprenticeships nuclear engineering as well as every apprentice in the UK
highly skilled occupational Clerical/administration support social mobility and industrial manufacturing. It also was enrolled on programmes
composition is consistent with Engineers many of the Company’s offers higher apprenticeships designed and approved by
its very productive workforce, 3% directors originally joined as in project management. employers. BAE Systems
as we will discuss further in apprentices. For example, Degree apprenticeships led the Aerospace and
Section 2.2. Other functions a third of the current enable participants to study Airworthiness and Maritime
management team in the towards a university degree Defence Trailblazer groups of
33% 31%
military aircraft division took whilst securing hands-on employers and has designed
apprenticeships. On average, experience, without the need skills, knowledge and
95 percent of all BAE Systems’ to pay fees. In addition, two behavioural competencies
apprentices complete their innovative master’s degree for over 20 occupational
programme and gain full- apprenticeships—the Post apprenticeship standards,
time employment within the Graduate Engineer and Systems with the aim of meeting long-
business. The programme Engineering courses—have term skills needs.
33%
has been rated ‘Outstanding’ been developed by a
by Ofsted and achieved the BAE Systems-led employers’
prestigious Princess Royal group and under the Defence
Engineering-related roles Training Award in 2016. Growth Partnership, respectively.
Source: BAE Systems
18 19
GRADUATE DEVELOPMENT
FRAMEWORK (GDF)
BAE Systems offers one of the UK’s most popular graduate
programmes. Graduates join the development scheme in
their business and function of choice, undertaking various
placements and structured training over two years.
Sophie Harker, GDF graduate
Sophie Harker, Aerospace engineer in Advanced Projects,

formerly on the Graduate Scheme, describes her experience as a
graduate at BAE Systems:
“My passion for engineering and technology began when I

BLOSSOM HILL, BUSINESS decided I wanted to be an astronaut (and I still do!). Joining
BAE Systems’ Graduate Development Framework, after
SUPPORT APPRENTICE IN THE completing my Master’s degree in Mathematics, has allowed
me to explore this passion through placements across a variety
MILITARY AIRCRAFT BUSINESS of platforms and departments, such as Eurofighter Typhoon
Aerodynamics and the development of future projects. I was
even the first employee to be seconded to Reaction Engines
Blossom Hill, BAE Systems’ packed and ready to move to run in another company and
Ltd, who are developing the Synergetic Air-Breathing Rocket
UK Apprentice of the Year, university when I received the another country. I have also
Engine (SABRE™). Through this, BAE Systems has enabled me
provides her perspectives on call from recruitment offering been lucky enough to visit
to develop my technical knowledge as well as mature ideas into
the apprenticeship programme: me a place on the scheme secondary schools, sixth forms
demonstration technologies.
at Brough, East Riding of and colleges to inspire students
“Like most people aged 18, Yorkshire—unsurprisingly I took with their next steps.
During my time on the GDF I was part of a group of graduates
approaching my final A-Level it and it was the best decision I
looking at emerging technologies that will influence the way the
exams I had to decide whether ever made. I can honestly say that without
military operates in the future. This is when I first researched
university was my next step the overwhelming support I
nanorobotics. I was fascinated by them and their versatility
or not. At that age, you’re The apprenticeship offered have received from so many
inspired me to form the idea to construct structures in space
often encouraged to start a more than I could have people, I wouldn’t be where
using nanorobots to create the raw materials. I entered this idea
university degree, and I had imagined. I was working on I am today as BAE Systems’
in the Royal Aeronautical Society’s ‘Go For Gold’ competition, in
offers from five top universities. the Hawk aircraft in varied UK Apprentice of the Year. I
celebration of their bicentennial year, and received 2nd prize.
Yet something didn’t sit placements, from Human am now about to embark on
quite right with me, and so I Resources to Finance, to a part-time Business Studies
On completion of the GDF I was named BAE Systems’ Technical
decided to apply for several Operations. Each placement degree, fully sponsored by
Graduate of the Year. As a result, I was put forward for the 2017
apprenticeships and jobs. gave me a different insight and BAE Systems. Although
Science, Engineering and Manufacturing Technologies Alliance
set of skills that I use now in attending university two years
(SEMTA) Awards in the ‘Graduate of the Year’ category. After
Many apprenticeships just my full-time role as a Cost and later than my friends, I have
being selected as a finalist out of hundreds of entrants, I was
aren’t designed for those Planning Engineer at Warton, real experience from one of
interviewed, explaining my achievements so far and portraying
finishing their A-Levels, but 127 miles away from where I the world’s largest defence
my passion for the technology development I have been part of.
when I came across the first started. I was lucky enough and security companies under
This was judged by a panel of industry representatives and on
apprenticeship at BAE Systems to be selected for the German my belt. If there is one piece of
International Women’s Day I was announced the winner; an extra
I looked further into it and Exchange where I worked advice I would give to students
special way to celebrate female achievement in engineering
applied straight away. I made with an Airbus apprentice it is to consider apprenticeships
and demonstrating the support the Company has given me to
it all the way to the interview in Manching, just north of as a real alternative to full-time
progress in my career to date.”
stage, but was initially placed Munich, for three weeks. This degrees, and make a choice
on the reserve list. I thought gave me a great insight into based on what you want and
my fate was sealed and I was how apprenticeships are how you learn.”
20 21
SIGMA SCHEME MOVEMENT TO WORK

The Sigma Leadership Movement to Work is a
Programme is BAE Systems’ Jenny said: “The great thing registered charity established
three-year fast-track about Sigma is that we, as by 25 of the UK’s leading
programme created for members, are responsible for employers in 2013. It aims to
people with the greatest going out and securing our tackle youth unemployment
leadership potential. With own placements. There is no by providing vocational
only a few places available blueprint or set path to follow, training and work experience
each year, it is a unique and which means each member’s placements to young people
quick-paced programme. Each journey is personalised to who are not in employment,
Sigma member is responsible their interests and passion education or training.
for arranging their own points within the business. BAE Systems plays a pivotal
placements, each of which It also provides us with the role in the organisation as a
typically lasts for six to twelve opportunity to develop our lead employer and, through
months. At the end of the leadership and technical skills it, is also a partner in the UK
Sigma Leadership Programme, at a fast pace.” Government’s “See Potential”
members are expected to Jenny is currently working campaign. BAE Systems works
take on substantive roles at an as an Engineering Project She added: “The access to with the Prince’s Trust to deliver
executive level. Manager within the military senior leaders within the the programme. The Trust
aircraft business of business is invaluable, as provides young people who are
Jenny Rowsell, Engineering BAE Systems, which we’re able to meet them accepted onto the scheme with
Project Manager, BAE Systems’ four times a year to discuss vocational training, before they pledging to provide 420 © Copyright City & Guilds
involves the planning and
military aircraft business various opportunities within then embark on a two-week placements each year. By April
establishment of project
the business and they always work experience placement at 2017, BAE Systems’ supply
level engineering, reviewing
Jenny Rowsell joined provide insightful tips and BAE Systems. chain companies had provided
and monitoring technical
BAE Systems’ Sigma advice on our progression 243 placements in total, with
aspects of certain projects and
Leadership Programme in and development.” BAE Systems invests almost 94 percent of young people
accountability for the overall
September 2016 after leaving £150,000 in the scheme who have taken part gaining a
performance of projects within
the University of Surrey with an In addition, Jenny has been annually, offering 98 places each job following their involvement
the business.
Electronic Engineering degree. assigned both a corporate year. To date, 295 young people in the scheme.
Her first placement with the and technical mentor, who are have received placements with
Jenny had always shown on hand to offer advice and the Company and of these 166 In 2017, BAE Systems was
Sigma programme was within
an interest in engineering support throughout her time have gone on to either secure awarded a Princess Royal
the submarines division,
from a young age, securing on the programme. employment with the Company Training Award in recognition
where she was employed as a
an Arkwright engineering or another local employer, or of its commitment to tackling
Technical Manager working in
scholarship when she was have returned to education. youth unemployment, through
Combat Systems. In this role,
16 years old. This opened Almost 80 have subsequently its Movement to Work
she was part of a project that
her eyes to the various secured an apprenticeship with programme. Chris Jones, Chief
aimed to improve the software
career opportunities within BAE Systems in different parts Executive of the City and
update process for the Combat
engineering. She first came of the organisation. Guilds Group, which promotes
System. As part of the role,
to think of BAE Systems as a the award, said: “It has never
she contributed to the design
potential employer while at As well as offering these been more important for
of a bespoke software toolset
university, where she crossed kinds of opportunities to Britain’s businesses to invest
enabling the automation of
paths with many people who young people, BAE Systems in training to boost their
large parts of the process,
worked within cyber security has encouraged many other productivity, address skills
making the process more
and intelligence, which is companies that it works with gaps and develop their leaders.
streamlined and robust.
located at the university to be part of the scheme. In I congratulate BAE Systems,
campus in Guildford. fact, more than 40 additional who presented examples
employers have been recruited of innovative, inspiring and
by BAE Systems, collectively impactful training.”
22 23
1.4 SUPPLY CHAIN BAE Systems buys goods and Fig. 5: BAE Systems’ procurement spending by local authority district, 2016
£4.0 bn
CONTRIBUTION services from UK suppliers
across a wide range of
To undertake its activities, industries. In 2016, it spent
Expenditure by BAE Systems BAE Systems purchases many £1.1 billion on engineering and
with its UK suppliers in 2016 of the goods and services it technical business services
needs in the domestic market. with UK suppliers and £600 £0-5 million
Through this, its procurement million on machinery and £6-10 million
This is 79 percent of supports significant economic equipment. £11-50 million

its total procurement. activity and employment £51-100 million
across the UK. BAE Systems’ £4.0 billion
£101-200 million
annual spend on goods
>£200 million
In 2016, BAE Systems spent and services from domestic
£4.0 billion on inputs from suppliers is estimated to BAE Systems' sites
some 8,900 suppliers in the have supported 59,900

UK, representing 79 percent people in FTE employment
of its total procurement. Of in the UK. As expected,
this total, suppliers located in given the composition of
the South East and the North the domestic procurement
West received about £700 spend, the industries
million respectively, followed displaying the largest
by suppliers in the South employment contributions
West and the East of England, were professional and
which received almost £600 administrative services, as
million of BAE Systems’ well as the manufacturing
procurement respectively. In sector (Fig. 6).
particular, suppliers located
in the local authorities of Fife, Source: Oxford Economics, BAE Systems
Salford, South Gloucestershire
and Luton emerged as the
primary beneficiaries of the
Company’s supply chain
spending in 2016 (Fig. 5). Fig. 6: Indirect employment contribution by industry, 2016
Employment (FTE)
Professional services
Administrative services
Manufacturing
Retail & wholesale
Info & communications
Transport & storage
Construction
Public admin
Education
Financial services
Utilities
Accommodation & food
Power
Other
0 5,000 10,000 15,000 20,000 25,000 Source: Oxford Economics
24 25
1.5 CONSUMER SPEND In addition to this, as described

CONTRIBUTION in Section 1.4, BAE Systems’
procurement supports 59,900
Both BAE Systems and its people in jobs at suppliers
suppliers pay wages to their in the UK. These people are
staff, and a proportion of estimated to receive a further
this income is subsequently £1.6 billion in wages, based on
used by employees to the industrial sectors in which
purchase food, clothing and they work.
a wide range of goods and
services from UK businesses. Staff at BAE Systems and
The economic activity that in its supply chain spend a
this spending generates proportion of their wages in
constitutes the ‘induced’ UK retail and leisure outlets,
impact of BAE Systems on the helping to sustain domestic
UK economy. businesses. Their expenditure
is estimated to support 35,900
In 2016, the Company paid £1.4 FTE jobs in the UK, many of
billion in gross salaries to its these being in the retail and
34,600 FTE employees in the hospitality sector (Fig. 7).
UK. The average gross wage
for BAE Systems’ UK staff in
2016 was £40,300. This was 17
percent above the average
for UK workers (at £34,400
in 2016).
Fig. 7: Induced employment contribution by industry, 2016
Employment (FTE)
Retail & wholesale
Accommodation & food
Professional services
Manufacturing
Transport & storage
Financial services
Health
Agriculture
Construction
Education
Arts & entertainment
Other
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 Typhoon aircraft assembly
at BAE Systems’ site in
Source: Oxford Economics Warton, Lancashire.
26
2. GDP CONTRIBUTION AND

PRODUCTIVITY
This chapter outlines Of this combined total, the 2.2 DIRECT GDP Our analysis shows that the
£11.1 bn 2.5
BAE Systems’ contribution to Company itself contributed CONTRIBUTION labour productivity of
UK GDP during 2016. In doing so, £4.4 billion gross value added BAE Systems’ workforce—as
we review the different channels to national GDP, whilst the In 2016, BAE Systems earned measured by value added
Total contribution to UK GDP of economic impact and remaining £6.7 billion was £9.5 billion in income in the UK. directly contributed to the BAE Systems’ gross value
supported by BAE Systems in 2016 examine the Company’s labour supported through its supply Some £9.1 billion of this came UK economy per full-time added multiplier
productivity. All monetary figures chain and consumer spending from the BAE Systems’ defence equivalent employee—was
presented reflect prices during multiplier effects. Our business, while the remaining significantly above the national
£4.4 billion directly generated, the 2016 period. modelling, therefore, indicates £0.4 billion came from its civil average. At £128,000 per For every £1 of economic
£3.6 billion supported through that BAE Systems had a gross operations. Of this income, FTE employee in 2016, the activity generated by the
the supply chain, and £3.1 billion 2.1 TOTAL GDP value added multiplier of 2.5, BAE Systems spent about £4.0 Company’s labour productivity Company itself, a total of
through consumer spending. CONTRIBUTION so for every £1 of economic billion in 2016 on goods and was almost 80 percent higher £2.50 is supported in the UK
activity it produced in the UK, services procured from around than the UK average of £72,000 economy as a whole.
As well as supporting it supported a total of £2.50 in 8,900 UK suppliers and a (Fig. 9). The Company’s
further £1.0 billion from suppliers relatively high productivity is
5
employment, BAE Systems the domestic economy.
also contributes substantially located overseas. Based on underpinned by its drive towards
to the UK’s economic activity, this information, we estimate innovation and its investment in
80%
conventionally measured in that the Company made a human capital, which ensure the
terms of Gross Domestic Product £4.4 billion direct gross value workforce is equipped with both
(GDP). In total, the Company added contribution to GDP, or cutting-edge technologies and
contributed £11.1 billion to UK 0.2 percent of all the economic skills to efficiently carry out their more productive than
GDP in 2016, or 0.6 percent of all output produced in the UK day-to-day tasks. the national average
economic output in the country. in 2016. BAE Systems’ gross
As with employment, this total value added contribution to the
contribution represents the UK was measured using the £128,000 gross value added
sum of three types of impact— ‘production approach’, which is per FTE worker in 2016.
direct, indirect, and induced, as the difference between revenues
illustrated in Fig. 8. and the costs of inputs from
domestic and foreign suppliers.
Fig. 8: BAE Systems’ contribution to UK GDP, 2016
Gross value added (£bn) Fig. 9: Labour productivity of BAE Systems in context, 2016
12 £ 000s per FTE employee
11.1
140,000
10 128,000
3.1 3.1
120,000
8 100,000
72,000
6 3.6 3.6 80,000
60,000
4
40,000
2 4.4 4.4 20,000
0
0 BAE Systems UK average
Direct Indirect Induced Total
Source: Oxford Economics Source: Oxford Economics
28 5
The £2.50 includes the gross value added produced within BAE Systems, plus that which 29
results from indirect and induced multiplier effects
2.3 SUPPLY CHAIN Via its supply chain,
£3.6 bn
CONTRIBUTION BAE Systems’ contribution to
GDP boosted a range of sectors
As with the effects on across the UK economy; a third
employment, BAE Systems’ (or £1.2 billion) of the boost GDP contribution supported by
expenditure on goods and in GDP from the Company’s BAE Systems via its supply chain
services feeds through to procurement benefitted domestic
numerous business activities firms in the professional services
in its supply chain, sustaining sector, mainly engineering, This expenditure sustains
economic activity and jobs as expected (Fig. 10). In economic activity and
PRODUCTIVITY THROUGH in the wider UK economy. As

noted earlier, during 2016,
addition, GDP supported at UK
manufacturing firms constituted
supports jobs in the wider
UK economy.
PEOPLE—AN INITIATIVE TO the Company purchased

£4.0 billion worth of goods
another fifth of the indirect
impact (or £0.8 billion).
CREATE A NATION OF BRILLIANT and services from about

8,900 suppliers in the UK,
BUSINESS LEADERS 28 percent from firms in the

engineering sector, 15 percent
from manufacturing firms
In July 2015 and in response management and lacklustre visits to industrial partners and the remainder across the
to the UK’s productivity leadership are inextricably including BAE Systems, Rolls- rest of the UK economy. This
challenge, a group of some of linked with poor productivity. Royce and Siemens, as well expenditure is estimated to
Britain’s most senior business The leaders in the most as participating in workshops, support a GDP contribution
leaders, including Sir Roger productive organisations masterclasses, and mentoring. of £3.6 billion.
Carr, BAE Systems’ Chairman, had demonstrated ways to
formed the Productivity engage their workforces and Two pilot programmes have
Leadership Group. The Group unleash their energy and the been created with Lancaster Fig. 10: Breakdown of GDP supported via BAE Systems’ domestic supply chain, 2016
began to explore what could Group concluded that the and Bath University Business
practically be done to achieve techniques used to do this Schools involving 42 delegates £ bn
10 percent productivity could be adopted by other from 34 businesses that
growth by 2019. A focus has leaders too. This formed the together have a turnover of Professional services
been to work with Small and basis of Productivity Through £2.7 billion and a combined Manufacturing
Medium Sized Enterprises People (PTP)—an initiative staff of 7,000 employees. The
(SMEs) who make up 99.9 which offers a management programme has been designed
percent of private sector approach that is teachable with scalability in mind. Plans Info & communications
businesses and 60 percent of and aims to create a nation of are in place to launch PTP in Retail & wholesale
all private sector employment, brilliant business leaders. Scotland, Birmingham, London, Financial services
but often find it too risky and Northern Ireland and Wales. By Transport & storage
costly to invest in training and PTP is a unique collaboration 2020 PTP is scheduled to run Construction
6
productivity programmes. between industry and two programmes a year, from
Public admin
academia and offers a seven centres across the UK.
Education
The Group studied highly 12-month programme
productive workplaces and for leaders within SMEs, PTP is jointly funded by SMEs, Power
found distinct and common wishing to ‘work on the the sponsoring businesses and Utilities
themes. Early research business not in the business’. Local Enterprise Partnerships. Mining
and conversations with Having undertaken their Other
organisations across the benchmarking exercises,
country revealed that poor participants make a series of 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4
Source: Oxford Economics
6
National Federation of Self Employed & Small Businesses Limited - UK Small Business Statistics. 31
COMPLIANCE
SUPPORT FOR
SUPPLY CHAIN 2.4 CONSUMER SPEND resulted from BAE Systems’
£3.1 bn
CONTRIBUTION operations was spread
around the UK economy.
In addition to the direct This allocation largely
and indirect (supply chain) reflects how UK consumers Contribution to UK GDP in 2016
GDP contribution, a further choose to spend their via consumer spending
economic stimulus is created disposable income. As such,
when BAE Systems and the the real estate sector was a
firms in its direct supply notable beneficiary of this This impact is generated as
chain pay their staff wages, expenditure (£0.7 billion of staff of BAE Systems and
which are then spent in the GDP), while retail output its direct suppliers spend
domestic economy. This was boosted by £0.5 billion, their wages.
expenditure supported reflecting the purchase of
a further £3.1 billion goods from local shops and
contribution to UK GDP supermarkets.
in 2016.
Activity sustained as workers

spend their wages primarily
JOSCAR (Joint Supply Chain information once, rather supports consumer-facing
Accreditation Register) is a than providing the same industries such as real estate
supplier compliance strategy information several times. and retail. Fig. 11 illustrates
developed by BAE Systems how the £3.1 billion GDP
alongside ADS, the UK trade For SMEs, where there is a contribution supported by
organisation for companies stated government ambition consumer spending that
in the UK aerospace, defence, to open up the defence
security and space sectors, sector, the intention is to Fig. 11: Breakdown of induced GDP impact by sector, 2016
and in consultation with reduce barriers to entry.
small and medium-sized The increased transparency £ bn
companies (SMEs) working provided by a clear strategy
in the sector. It establishes a aims to boost access to Real estate
standardised approach to the opportunities and encourage Retail & wholesale
kinds of information needed more new entrants into the Financial services
across supply chains in these supply chain. Feedback from Accommodation & food
industries, making it easier SMEs has been positive in
for companies to understand this regard, with companies
how to work with firms like valuing the opportunity to Professional services
BAE Systems. It should make their products and Manufacturing
enable the more efficient services more visible to other Transport & storage
collection of straightforward defence primes via JOSCAR. Administrative services
compliance information Already, more than 6,500 Construction
such as insurance details, suppliers have been invited to
Health
ISO accreditations and so join the scheme. Of these, 908
on, making collaborating are specific to BAE Systems’ Power
easier for all parties. For naval support services. Education
example, suppliers are now Other
only required to complete
and provide compliance 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
32 33
The first of the UK’s F-35B
Lightning II jets to be flown
to the UK. Crown Copyright
3. TAX CONTRIBUTION
The economic activity and A total of £618 million in taxes Fig. 13: BAE Systems’ direct tax contribution by type, 2016
£2.5 bn
employment contributions was paid through the direct
outlined in sections one activities of BAE Systems in 2016.
and two of this report bring Of this amount, employer and
Total tax contribution supported with them further benefits employee National Insurance £ million
by BAE Systems in 2016 as a consequence of the tax contributions accounted for Other Taxes 11
revenues that they generate. £277 million or 45 percent
These are used, in turn, to of the Company’s direct tax Corporation Tax 45
Direct tax contributions finance essential public services. contribution (Fig. 13). In addition
generated by the Company’s to this, employees’ payments
activities account for In total, either directly or of income tax on their wages
£618 million of this figure. through secondary channels, generated £286 million for the
BAE Systems supported a total Exchequer, or 46 percent of the Employee NICs 116 Income Tax 286
tax contribution of £2.5 billion total. Payments of corporation
to the UK Exchequer in 2016 tax by BAE Systems accounted
(Fig. 12). To give a sense of scale, for some £45 million or seven
this amount would cover the percent of the tax payments
estimated 2016-17 Departmental made by the Company and
Resource Budget of the Foreign its staff.
and Commonwealth Office and
7
the Cabinet Office combined.
Employer NICs 160

Fig. 12: BAE Systems’ total tax contribution in the UK, 2016
Tax contribution (£m) Source: BAE Systems
3,000
2,459 On top of the tax contributions tax footprint of BAE Systems,
2,500 made through the direct therefore, stood at £2.5 billion.
activities of BAE Systems, For every £1.0 million paid
2,000 further tax revenues were directly by BAE Systems in
975 975
generated through the supply taxes, a further £3.0 million
chain and consumer spending was generated for the
1,500 activity supported. These Treasury across the rest of the
came in the form of social UK economy.
1,000 877 877
security payments, income
tax, corporate income tax and
500 further taxes on production
618 618 and products, including
0 Insurance Premium Tax and
Direct Indirect Induced Total Carbon Reduction taxes.
A total of £877 million is
attributed to the indirect effect,
with a further £975 million in
Source: Oxford Economics the induced effect. The total
36 7
HM Treasury, “Spring Budget 2017”, March 2017. 37
GUIDES IN ENGINEERING UK SPORT
Three members of the to overcome the difficulty female engineers. They noticed Since 2008, BAE Systems More recently, BAE Systems’ “Having access to
BAE Systems’ early careers of inspiring young girls into an immediate and positive has worked in partnership engineers developed the UK’s BAE Systems’ engineering
community were recently in engineering by working change in the girls’ perceptions with UK Sport to provide first computerised indoor capabilities has significantly
Boston, USA, collecting their with Girlguiding UK, the of the profession, which drove state-of-the-art technology trainer for racing wheelchairs. increased our technical
Gold Chairman’s Award—the leading charity for girls and the team to broaden their and engineering solutions The Wheelchair Athlete Test ability, helping our athletes
Company’s highest recognition women in the country. The approach and reach out to to help British athletes and Training system allows and their coaches seek those
of achievement. G-Eng programme has been Guides nationally. achieve sporting success. wheelchair racers to alter winning margins, both in
awarded ‘Inspirational STEM The ongoing partnership resistance on the wheels, training and in competition.
Sophie Dent, a Graduate Engagement Project 2017’, G-Eng has now launched the has benefitted more than which, in effect, simulates It also helps us highlight the
Development Framework an award designed to reward Guides’ first engineering badge 30 sports and 250 British different racing environments range of sports available to
member, alongside Beth sustained and long-term pack, available to nearly half a athletes, with BAE Systems’ from anywhere across the young people—giving them
Howarth-Henry and Lauren engagement in inspiring young million girls and young women engineers having worked globe. The system can also even more incentive to get
Eastburn, Higher Apprentices, people in STEM subjects. across Girlguiding UK and has with athletes from sports as replicate any outdoor training involved from an early age
earned this accolade as a plans to expand the scheme diverse as taekwondo and sessions just as effectively and helping us develop
result of their work promoting Sophie, Beth and Lauren using fellow BAE Systems’ track cycling, to sailing and indoors, meaning that young British talent.”
Science, Technology, started small; setting up a graduates across the USA, short-track speed skating. training quality and schedules
Engineering and Maths (STEM) showcase event to expose Australia and the Kingdom of are never compromised by Liz Nicholl, Chief Executive
to young girls across the local Guides to a range of Saudi Arabia. One early and notable the weather. at UK Sport
UK. The project, ‘Guides in engineering disciplines through partnership success came
Engineering’ (G-Eng) aimed STEM activities and talks from through collaboration with the BAE Systems also uses
Universities of Loughborough examples from its innovative
and Southampton in work in the field of sport to
redesigning a Skeleton sled, engage students during visits
which Amy Williams used to schools and events that
to win Gold in the 2010 promote STEM subjects.
Vancouver Winter Olympics.
38 39
4. WIDER IMPACT
Over and above the growth, by adding to demand
£4.7 bn
conventional economic impact for UK goods and services, and
made by BAE Systems that has stimulating employment creation
already been considered, the as a direct consequence of
Total exports sold by BAE Systems’ Company generates a range of enhanced demand. Furthermore,
UK businesses in 2016 broader economic benefits for the export of BAE Systems’
the UK. These accrue through products helps to develop and
the value that the Company’s reinforce strategic government-
This represents approximately exports, investments and R&D to-government relationships.
0.9 percent of the UK’s total activities generate beyond
exports in the year. the employment and GDP Around 80 percent of export
contributions already discussed. sales were to the Middle East,
including the sale of Typhoon to
4.1 EXPORTS Saudi Arabia and Hawk trainer
to Oman (Fig. 14). Another
BAE Systems is a growing force significant export market in 2016
in export markets; earnings from was the United States.
sales abroad totalled £4.7 billion BAE Systems’ UK businesses
in 2016, or just over 49 percent of
the Company’s UK turnover. This
exported £590 million of goods
to the US in 2016, including BROADSWORD®
represented about 0.9 percent
of all UK exports of goods and
services in 2016. While the value
components for the F-35
Programme. This is separate
to the significant sales made
SPINE®
of these exports is already by BAE Systems, Inc., the In recent years BAE Systems removing the need to carry
captured in the core economic Company’s US subsidiary and a has worked with Intelligent multiple batteries. The use of
impact analysis as part of top-ten supplier to the Pentagon. Textiles Limited (ITL), a small e-textile removes the burden of
BAE Systems’ revenues, exports BAE Systems imported £1.04 but cutting-edge developer in trailing cables that can hinder
play an important role in the billion worth of goods and the field of e-textiles (electrically movement and create snag
wider UK economy. Exports services in 2016, meaning that it conductive fabric). hazards and, combined with
positively affect economic made a net positive contribution utilising a single battery type,
to the UK balance of payments The first product of the reduces the weight carried by
Fig. 14: Export revenue breakdown by origin, 2016 of around £3.63 billion. partnership was the the wearer. Due to the range of
Percent of total exports Broadsword® Spine®, a electronic devices it supports, the
Foreign markets offer programme based out of the product is suitable for use by the
Other 2% significant potential to grow BAE Systems’ Frimley site in armed forces, first responders
Rest of Europe 5% the Company’s sales beyond Surrey, with production carried and security services.
Australia 1% the value that can be sustained out at the Rochester site. This
USA 13% by UK demand alone and innovative power and data The two companies formed a
BAE Systems’ focus on management architecture can close working relationship, which
exports aligns with the UK be inserted into almost any load culminated with an exclusive
Government’s push for a growth carriage and uses lightweight licensing arrangement signed
8
in exports. BAE Systems e-textiles to transfer power and in December 2015. This agreed
appears very well placed to data around the wearer to eight approach allowed ITL to retain
help the UK reach this goal, separate connection points. their agility and innovative nature
whether through exporting new Power can be provided from while BAE Systems provided
products or by broadening the a central battery pack to each its international reputation and
sales of its existing range of of these connection points, footprint in global markets.
Middle East 80%
goods and services.
Source: BAE Systems
40 8
“UK Trade and Investment”
www.gov.uk/government/organisations/uk-trade-investment/about [accessed 22 May 2017]
BARROW SHIPYARD INVESTMENT

The £300 million-plus a new quayside; extension of which is the largest at the
investment at the Barrow the current submarine build shipyard since the early
4.2 CAPITAL INVESTMENT Major capital investments yard is catering for continued hall; the erection of a new 1980s. Part of the projected
£222 m
through 2016 included the expansion of the submarines manufacturing facility and new investment has occurred
Beyond the economic value development of facilities and division workforce, and paint facility; refurbishment of at the Waterfront Business
supported by BAE Systems’ infrastructure on behalf of increasing BAE Systems’ the main fabrication facility; Park, adjacent to the Port
Total fixed capital investment operational expenditure, which the Ministry of Defence at economic contribution within and construction of a new of Barrow. Here a new
by BAE Systems in the UK in 2016 is assessed in sections 1.4 BAE Systems’ submarines the coastal Furness area Central Training Facility. 28,000m2 logistics facility
and 2.3, the firm also invests division shipyard in Barrow- of England. The eight-year has been constructed to store
significantly in capital spending in-Furness to support the programme covers a range Up to 20 different project the components, parts and
This equates to around and R&D, further stimulating design and build of the Astute of infrastructure investment elements will be incorporated materials needed by
£6,400 per FTE employee. activity in the rest of the and Dreadnought classes on the existing site, including in the whole development, the shipyard.
economy. These investments of submarine. The project
will boost the Company’s was worth £225 million, £163
capabilities and economic million of which was funded
impact in the UK for years to by the Ministry of Defence.
THE ACADEMY OF
£4.4 bn
come, as well as reinforcing the The Company has also
Total R&D spending by BAE Systems

strength of the supply chain,
including SMEs.
invested £15.9 million in a new
skills academy at Samlesbury
in Lancashire and a further
SKILLS & KNOWLEDGE
in the UK over the past five years In 2016, BAE Systems invested £400,000 at Portsmouth
a total of £222 million in capital Naval Base to accommodate
in the UK, or about £6,400 the Queen Elizabeth Class
£1.0 billion was spent on per full-time employee, to aircraft carrier. In addition,
R&D in 2016 alone. develop new assets, or to BAE Systems invested
improve existing ones. The around £1.2 million in the New
development of facilities and Skills Development Centre
infrastructure adds to the UK and £2.4 million in the New
capital stock and expands the Maritime Engineering Centre,
productive capacity of workers a partnership project with
who use the resulting facilities. the Solent Local Enterprise
Besides the private returns Partnership and the Ministry
to BAE Systems, its capital of Defence. Both of these
projects will also benefit other will benefit the training of
domestic businesses and the future tradespersons working
UK economy as a whole for on the Naval Base, as well
years ahead. Indeed, one of as creating efficiencies BAE Systems’ Academy of The Academy is equipped rapid prototyping of parts;
the most important ways to and delivering engineering Skills & Knowledge (ASK) is a with the latest technology, and a carbon fibre cleanroom
stimulate a country’s economic support to all classes of ships new £15.6 million investment replicating the equipment to help trainees understand
growth is through improved based at Portsmouth. Other to ensure employees have the used to build the Eurofighter the materials used in aircraft
capital stock. Improved major capital projects were skills to continue engineering Typhoon and the F-35 manufacture. The ASK also
capital goods increase undertaken by the military and manufacturing the Lightning II. This includes a houses an education centre
labour productivity, the most aircraft business, with an military aircraft of the future. manufacturing Kuka robot used by local schools and
important driver of long- investment of nearly £55 Located alongside the cell identical to the one found colleges, and facilities for life-
term economic growth and million, and by the cyber advanced manufacturing hub in BAE Systems’ advanced long learning.
improved standards of living. security and intelligence in Samlesbury, Lancashire, manufacturing line; a virtual
In addition, in the short run, business, which invested it will be home each year reality cave, used in a training
investment stimulates jobs and almost £18 million in 2016. to nearly 200 apprentices environment for the first
economic activity through the recruited by the Company’s time; 3D printers to teach
multiplier impacts discussed in military aircraft business. skills in designing and the
previous sections of this report.
42 43
4.3 TECHNOLOGY AND R&D defence and security industry. to the overall pool of
1,600
These capabilities represent a knowledge and know-how
In addition to fixed capital major asset to the UK defence in the economy. This, in turn,
investments, the Company industry, which benefits from can lead to innovation in
also invests heavily in R&D, the resulting cutting-edge other areas, whether that be
reflecting the emphasis it technologies developed. profitable activity for other Granted patents
places on applied science, firms, improvements to public
innovation and technological Research produced internally services, or benefits in areas
2,350
development. Over the past within BAE Systems, such as health or security.
five years, total R&D spending and in partnership with Indeed, a study by Frontier
in the UK has amounted to universities, often results Economics finds that R&D
£4.4 billion, £1.0 billion of which in the development of new investment typically delivers a
came in 2016 alone (Fig. 15). products and processes, which median rate of return of 20 to Pending patent applications
in turn contribute to improving 25 percent to the investor, but
This research leverages existing technologies or that society as a whole may
BAE Systems’ skilled workforce, creating new ones. Such enjoy returns which are two to
9
as well as its relationships with improvements tend to have three times greater than this.
businesses, universities and an impact that transcends the
research institutions and ensures private economic return to
that the Company remains BAE Systems, as
at the forefront of the global developments contribute
Fig. 15: BAE Systems’ R&D spending, 2012-16
The patent system plays a very BAE Systems was the second
£ million
important role in promoting biggest patent applicant
innovation, as it enables in the UK under the Patent
1,200
investors in R&D to partly Cooperation Treaty system,
10
internalise these returns. By with 103 applications. The
1,000 granting monopoly power Company typically files
on a particular technology between 120 and 140 patent
800 for a limited time, patents applications annually for
provide a reward for R&D new inventions from its
600 investors for the time, effort UK businesses alone. The
and ingenuity devoted to the European Patent Office (EPO)
product’s creation. Thanks ranked BAE Systems as the
400
to the financial returns that fourth largest UK applicant
companies can enjoy when in 2016, with a total of 149
200 patenting a new creation, firms
11
applications. The large
retain the incentive to fund number of patents granted to
0 scientific research and hence the Company demonstrates
2012 2013 2014 2015 2016 to develop new technology. that BAE Systems is a major
force in R&D within the UK.
Source: BAE Systems BAE Systems’ UK businesses
currently have just over 1,600
granted patents worldwide,
with a further 2,350 pending
applications. In 2015,
44 9
Frontier Economics Ltd, Rates of return to investment in science and innovation (London: 10
www.wipo.int/ipstats/en/statistics/country_profile/profile.jsp?code=GB [accessed 28 April 2017] 45
Department of Business Innovation and Skills, 2014). 11
“UK companies and researchers at the European Patent Office”, in RealWire www.realwire.com/releases/A-good-2016-for-UK-
companies-and-researchers-at-the-European-Patent-Office [accessed 28 April 2017]
MIXED REALITY UNMANNED WARRIOR

BAE Systems has been working For example, with support from are able to zoom in on areas
extensively on innovations in the University of Birmingham, and manipulate environments,
the field of augmented reality, BAE Systems is developing as well as direct troops and
including the so-called ‘mixed two mixed reality technology receive information such as
reality’ concept, or the merging concepts. The first of these is news updates and feeds from
of the real and virtual world. The the Portable Command Centre, other devices.
Company’s scientists believe which is able to create a semi-
mixed reality has the potential virtual environment through The second concept is the
to play a significant role in the a tool the size of a briefcase. wearable virtual cockpit,
future of military operations The command centre can be a headset designed for
as it will improve situational set up anywhere and could aircraft pilots. The cockpit
awareness and decision-making. be particularly helpful in case provides virtual displays and
Mixed reality is expected to of emergency, such as during controls which can be easily
generate significant benefits in natural disasters or terrorist customised based on the
terms of the resources and time attacks. Using a virtual reality pilot’s preferences, leading to
saved, thanks to the possibility headset and gloves, users can considerable savings of time
of replacing machinery that is monitor situations anywhere and money.
expensive and bulky at present in the world using a control
with portable, easily-upgradable station that appears in front
and customisable tools. of them; for example, they
IRONCLAD 2 UNMANNED
GROUND VEHICLE BAE Systems’ technology
was a major element in the
Royal Navy’s Unmanned
In addition, the Autonomous
Control Exploitation and
Realisation (ACER) system,
One benefit of the ACER
system is ease of use: the
system integrates sensors
Warrior exercise off the coast developed by BAE Systems on vehicles from multiple
Engineers at BAE Systems’ support, reconnaissance, urban of Scotland in 2016. in collaboration with QinetiQ, suppliers into one control
Telford site have recently operations and force protection. Thales and Seebyte, provided point, minimising the
developed the Ironclad 2 The Company’s Pacific a transportable command and number of screens. It also
concept vehicle, which has Ironclad 2 is capable of Class 950 Unmanned control system that enables allows for seamless two-way
resulted in six new patents maintaining operational Rigid Inflatable Boat can a ship to use the unmanned communication between the
being registered. This is tempo in hostile, complex operate either manually or vehicles to track, monitor and unmanned vehicles and the
an autonomous all-terrain and contested environments autonomously on demand. intercept potential incoming command team based on the
Unmanned Ground Vehicle and benefits from very high Most significantly, the attacks, as well as allowing for hosting warship: the team is
which provides a highly mobile protection levels. It is designed autonomous system can be full control of all stages of a able to receive information
and survivable ground support as an autonomous or remotely retro-fitted as a modular vehicle’s mission, from initial from the unmanned vehicles
capability to the armed forces. operated platform with upgrade on existing boats, planning to final execution. and send them commands.
flexibility in mind: small enough including those used
It is a versatile and modular to be transportable without the extensively by the Royal
platform, capable of mounting need for a trailer, but powerful Navy, making it an affordable
a multitude of different missions enough to transport up to technological advance.
for roles such as logistics 500kg of equipment.
46 47
REACTION ENGINES LTD

BAE Systems invested almost “The University of
£10.7 million with 69 UK Southampton highly values
universities in 2016. Recently, the relationship with a
the Company has formalised world-class company
new working relationships and looks forward
with five UK universities to strengthening our
chosen for their expertise relationship to achieve even
in many strategically greater mutual benefits.”
important technological
capabilities. Ongoing joint- Prof. Mark Spearing,
research projects include Pro Vice Chancellor
work with the University of (International), University
Southampton, relating to of Southampton
sound and vibration, artificial
intelligence, data fusion and
maritime technologies, as
well as work on unmanned
air vehicles and avionics
testing in collaboration with
Cranfield University. As an
established leader in novel
In 2015, BAE Systems made a atmospheric air entering the it plans to undertake the first materials and advanced
strategic investment of £20.6 engine is cooled from over 1,000 ground based demonstration of manufacturing, the University
million with UK engineering firm degrees C to -150 degrees C its SABRE™ engine. The facility of Manchester is another
Reaction Engines Ltd, taking 20 within 50 milliseconds (1/20th at Westcott, Buckinghamshire, important university partner,
percent of the company’s share second). A novel pre-cooler (a will enable Reaction Engines with BAE Systems providing
capital and forming a working type of heat exchanger) has Ltd to test critical subsystems sponsorship and industrial
partnership to drive forward the been patented, developed and and the SABRE™ engine core. supervision to PhD students
development of its revolutionary tested by Reaction Engines Ltd through the Engineering
SABRE™ air-breathing rocket to achieve this. Beyond Mach 5 “This investment reflects and Physical Sciences
engine. The partnership marries the engine will operate in ‘rocket the strength of British Research Council’s Industrial
the disruptive technology of mode’ powering a vehicle to engineering and technology Cooperative Awards in
Reaction Engines Ltd with higher altitudes and speeds and our ambitions as a Science and Technology. The
BAE Systems’ extensive (greater than Mach 25), enabling leading space nation. […] This Company is also working with
aerospace development and access to Earth orbit. partnership will strengthen the University of Birmingham
project management expertise, both organisations—helping to harness their technological
in order, ultimately, to bring Once proven, the technology is to create jobs in the UK’s capabilities in energy and
the engine into production expected to substantially reduce growing space sector and power management and with
and make the next great leap the cost of access to space ultimately to make the SABRE the University of Strathclyde
forward in powered space flight. enabling the system to deliver engine a reality.” on rapid integration and
low-cost vehicles to Earth orbit, manufacturing programmes.
The SABRE™ engine is designed whilst taking off and landing like Jo Johnson MP, Minister for
to operate like a conventional a conventional aircraft. Universities and Science
jet engine but at much higher
speeds (Mach 5—five times the In readiness for testing in
speed of sound) and at altitudes 2020, Reaction Engines Ltd
of over 85,000 feet. In this ‘air- has begun construction of a
breathing’ mode of operation, new engine test facility where
48 49
UNIVERSITY OF MAGMA FLAPLESS AIRCRAFT

BIRMINGHAM
The MAGMA flapless aircraft is a as flaps or slats. By blowing air provided specialist support,
joint project between over the structure, it enables financial assistance, and, as a
BAE Systems and the University flight control, instead of having potential customer, has helped
of Manchester. Built by the to open and close flaps or to direct the technologies
University of Manchester, slats to change the shape of to meet the requirements
MAGMA is a small scale, the wing during take-off and of the defence industry. The
Unmanned Aerial Vehicle (UAV) landing. If successful, the tests partnership also boosts the UK’s
test bed, used for introducing, will demonstrate the first ever defence industrial skills base by
testing and assessing new use of such circulation control supporting the next generation
equipment and technologies in in flight on a gas turbine aircraft of engineers and scientists in
flight. The current focus of tests and from a single engine. establishing the technologies of
using MAGMA is to replace, or the future.
improve the performance of, In partnering with the
existing control devices such University, BAE Systems has
BAE Systems spent over £15 students BAE Systems’

million with UK universities expertise: senior engineers
and colleges in 2016, from BAE Systems provide
forging partnerships that guidance and context, helping
support British education students develop and apply
and innovation through leading-edge technology to
investment and the sharing meet real-world requirements.
of expertise. One of the
Company’s five strategic One example of this is quantum
university partnerships is with technology. The University
the University of Birmingham, of Birmingham is one of four
who signed a partnering UK hubs for this research
arrangement with area, and focuses on sensing
BAE Systems in January 2017. and meteorology. Quantum
technology could revolutionise
Through this partnership, sensor development through
BAE Systems supports the the use of super cold atoms
University of Birmingham’s to detect minute changes in
pioneering research at the gravitational fields. Engineers
forefront of technology, from BAE Systems’ land
which will help to ensure the business are currently
Company can continue to working with the University
provide the UK’s armed forces of Birmingham academics to
with cutting-edge capabilities. investigate the technology’s
The Company provides funding use in the early and precise
to its strategic universities detection of physical threats
through PhD iCASE projects to troops. However, other
alongside the Engineering and applications, ranging from
Physical Sciences Research construction to dementia
Council, as well as direct research, could also benefit
project funding. This offers from this technology.
50
5. REGIONAL CONTRIBUTION
11,000
Across the UK, the Company 5.1 CENTRAL BELT OF The business is investing the region directly employed BAE Systems is also
manages about 50 sites, as SCOTLAND over £100 million across the 2,900 full-time equivalent contributing to the wider
well as employing staff in a Govan and Scotstoun sites to workers, with a further 6,500 development of the region
number of customer locations. The Central Belt of Scotland improve facilities, introduce FTE jobs supported in the through the redevelopment of
As a result of this, the activity region is home to two military new technologies and ways supply chain and a further the Royal Ordnance Factory Total FTE jobs supported in the
supported by BAE Systems shipbuilding sites (Scotstoun of working, and ensure the 1,700 FTE jobs supported site in Bishopton, one of Central Belt of Scotland
is spread across England, and Govan), as well as two business remains competitive. through employees’ consumer the largest privately-funded by BAE Systems
Scotland and Wales. The other sites in Hillend and spending (Fig. 17). The regeneration projects in the
previous sections of this report Bishopton, dealing with When taking into account employment multiplier was UK. The Company is working
have focused on the activities land business, naval support the impact of BAE Systems therefore 3.9 for the Central with a number of local For every 10 FTE jobs
and impact of BAE Systems in services and Shared Services. as a whole, some 11,000 Belt of Scotland region, partners to transform the site at BAE Systems, 39 were
the UK as a whole. This section In addition to these, the FTE jobs were supported in meaning that for every 10 FTE with new housing, commercial supported across the
breaks this down to look more Company continues to make the Central Belt of Scotland jobs at BAE Systems, 39 were and community buildings, and region as a whole.
specifically at the Company’s a significant contribution to region in 2016, which is supported across the region a woodland park.
impact in four regions of the Aircraft Carrier Alliance equivalent to one in every as a whole (including the jobs
particular interest: the Central based in Rosyth, with over 100 106 full-time jobs. The sites in at BAE Systems itself).
Belt of Scotland, South employees still working on the
Cumbria, the North West and Queen Elizabeth Class.
the South of England (Fig. 16).
Whilst the impact of BAE Systems’ military
BAE Systems as a whole shipbuilding business, whose
is taken into account for home is on the Clyde, is a
each of these regions, these very significant contributor
regions were chosen as places in this region. This business
of particular expertise for designs, builds and delivers
maritime and military aircraft complex warships and combat
design and manufacturing. systems for the Royal Navy,
as well as customers abroad.
© Copyright of ACA
Fig. 16: The four regions Fig. 17: BAE Systems’ contribution to employment in the Central Belt of Scotland, 2016
Employment (FTE)
Region name Sites within Local authorities within 12,000

11,000
10,000 1,700 1,700
Central Belt of Scotland Bishopton – land business and Shared Services City of Edinburgh, East 8,000
Govan – military shipbuilding Dunbartonshire, East
Hillend – naval support services and military Lothian, East Renfrewshire, 6,000 6,500 6,500
aircraft business Falkirk, Fife, Glasgow City,
4,000
Scotstoun – military shipbuilding Inverclyde, Midlothian,
Rosyth – site with BAE Systems employees North Lanarkshire, 2,000
Renfrewshire, West 2,900 2,900
Dunbartonshire, 0
West Lothian Direct Indirect Induced Total

Cumbria Barrow-in-Furness - submarines and weapons Allerdale,
Barrow-in-Furness,
Carlisle, Copeland, Eden, Fig. 18: BAE Systems’ employees by local authority of residence in the Central Belt of Scotland
South Lakeland
Naval support services, Hillend
North West Chorley – Shared Services Blackburn with Darwen,

Shared Services,
Preston Channel Way – Shared Services Blackpool, Burnley, Bishopton
Samlesbury – military aircraft business Chorley, Fylde, Hyndburn,
Warton – military aircraft business Lancaster, Pendle, Preston,
Fulwood (Preston) – site with BAE Systems employees Ribble Valley, Rossendale, Military shipbuilding,
Port Way (Preston) – site with BAE Systems employees South Ribble, West Glasgow (Scotsburn)
West Strand (Preston) – site with BAE Systems employees Lancashire, Wyre
South Ash Vale – submarines Basingstoke and Deane,

Broad Oak – naval support services and military Bournemouth,
aircraft business Christchurch, East Dorset,
Christchurch – naval support services and military East Hampshire, Eastleigh,
aircraft business Elmbridge, Epsom and
Cowes – naval support services Ewell, Fareham, Gosport,
Dorchester – military shipbuilding Guildford, Hart, Havant, Employment (FTE)
Farnborough – Head Office and Shared Services Isle of Wight, Mole Valley,
Frimley – military shipbuilding, submarines New Forest, North Dorset, 1-100
and military aircraft business Poole, Portsmouth, Military shipbuilding,
Guildford – cyber security and intelligence Purbeck, Reigate and Glasgow (Govan) 100-300
Portsmouth – military shipbuilding and military Banstead, Runnymede,
aircraft business Rushmoor, Southampton, 300-500
Land, Bishopton
Waterlooville – Shared Services Spelthorne, Surrey Heath,
Weybridge – regional aircraft Tandridge, Test Valley, >500
Weymouth – submarines Waverley, West Dorset,
Weymouth and Portland
Winchester, Woking
Source: Oxford Economics, BAE Systems
54 55
PROTECTING SHIP
CAPABILITY:
TODS DEFENCE
Tods Defence, based in “The team at Tods Defence
Portland, UK, is a world- has spent many years honing
renowned manufacturer of the talent and expertise
composite components for the required to produce such a
naval defence industry that critical component and we are
has been operating for over honoured for the opportunity
60 years. Its stellar reputation to be a part of this prestigious
has led to it becoming a programme…”
preferred manufacturer for
the Royal Navy and favoured Pete Eckersall, Vice President
supplier to navies worldwide, and Managing Director of
including in countries such as Tods Defence
the US, Australia and India, in
addition to NATO fleets.
BAE Systems’ successful

working relationship with Tods
Defence has spanned more
than 15 years, with a history
of collaboration on nuclear-
TYPE 26 powered fleet submarines

including the Astute, Swiftsure
and Trafalgar classes, as well
The Type 26 Global Combat cut steel on the first new Type design and manufacture as the Vanguard class nuclear-
Ship is designed for the Royal 26 Global Combat Ship for equipment for the first three powered ballistic missile
Navy to be used in a variety the Royal Navy in July 2017. ships currently extends to submarine. Tods Defence has
of roles, ranging from military During his speech, the Defence 44 companies, 25 of which recently won the contract for
operations to humanitarian Secretary unveiled the name of are based in the UK. As of the development of the bow
missions and general purpose the first ship as HMS Glasgow. November 2017, BAE Systems sonar domes for the Type
operations. Working with both This ceremonial event followed had invested more than 26, which will be created
the Ministry of Defence and the UK Government’s award of £540 million in supply chain from lightweight carbon-
the Royal Navy, BAE Systems a contract worth around £3.7 spending as part of the Type fibre structures. The dome on
designed the Type 26 in a fully billion for the first three ships of 26 programme. The Company each ship will house its sonar
digital environment using the an eight ship class to be built at estimates that this spending system technology which is
latest technologies. The ship is Govan and Scotstoun. As well has supported over 1,000 vital for detecting targets
the successor to the existing as fulfilling UK requirements, jobs across the UK maritime during anti-submarine warfare,
Type 23 anti-submarine BAE Systems is working to supply chain industry. The whilst having a minimal impact
variant frigate, with features export the Type 26 to key UK largest of the new contracts on hydrodynamics.
including a quiet hull as allies, including in response to are for the procurement of
standard for all variants of the Australia’s SEA5000 Future structural steel from Dent
ship and modular architecture Frigate requirement. Steel Services Ltd (Bradford)
permitting further upgrades as and sonar components from
new technology is developed. BAE Systems is the prime Thales (Cheadle) and Tods
12
contractor for production Defence (Portland).
The then Defence Secretary, of the Type 26. The full
Rt Hon Sir Michael Fallon MP, supply chain contracted to
12
BAE Systems, “550 UK jobs sustained by Type 26 Global Combat Ship contract awards”, 12 July 2017. 57
9,600
5.2 SOUTH CUMBRIA As well as being the prime considered to be one of chain, and a further 1,800
contractor for the seven the world’s most complex FTE jobs supported through
The South Cumbria region nuclear-powered submarines engineering challenges. employees’ consumer
is home to BAE Systems’ in the Royal Navy’s Astute The new submarines will be spending. The employment
Total FTE jobs supported in South submarines site in Barrow- Class programme, BAE Systems’ a completely new design, multiplier was therefore 1.4
Cumbria by BAE Systems in-Furness. The submarines submarines business is reflecting advances in design for the South Cumbria region,
business is contracted to the industrial lead for the techniques, production meaning that for every 10 FTE
work on some of the world’s Dreadnought programme. methods, and technology, as jobs at BAE Systems, 14 jobs
For every 10 FTE jobs at largest and most challenging In October 2016 steel was well as the changing nature of were supported across the
BAE Systems, 14 jobs engineering projects, having cut for the first of the military threats. region as a whole (including
were supported across the designed and built every Dreadnought Class nuclear those at BAE Systems itself).
region as a whole. submarine currently in service submarines designed to The Company’s operations
with the UK Royal Navy. replace the current Vanguard supported a total of 9,600
class. This followed the FTE jobs in South Cumbria
confirmation of £1.3 billion in 2016, equivalent to one
Fig. 19: BAE Systems’ employees by local authority of residence in the South Cumbria region in funding from the UK in every 20 FTE jobs in the
Government. Comparable region (Fig. 20). It directly
in size to the Vanguard employed almost 7,100 full-
class submarines, the next time equivalent workers,
generation of nuclear with a further 800 FTE jobs
deterrent submarine is widely supported in the supply
Fig. 20: BAE Systems’ contribution to employment in South Cumbria, 2016
Employment (FTE)
12,000
9,600
10,000
1,800 1,800
8,000
800 800
6,000
4,000
7,100 7,100
Employment (FTE) 2,000
1-250 0
251-1,000 Submarines, Barrow-in-Furness
>1,000
Source: Oxford Economics, BAE Systems
58 59
DREADNOUGHT
SUBMARINE
PROGRAMME
Based in Barrow-in-Furness, As well as expanding its A computer generated image
BAE Systems’ submarines own workforce to deliver of a surfaced Dreadnought
business currently employs Dreadnought, BAE Systems class submarine.
around 7,100 people on a is working with suppliers all
full-time basis. More than 1,800 across the UK in the supply
of these people are currently chain for the submarines. Some
working on the Dreadnought 85 percent of these are based
programme, which will design in the UK, with substantial
and build four new nuclear indirect economic effects as
deterrent submarines for a result. Over the course of
the Royal Navy, replacing the programme, the value of
the current Vanguard class. the supply chain is expected
The first of these is expected to reach £8-9 billion. More
to be in operation from than 350 suppliers will be
the early 2030s. This next involved over the course of the
generation of submarines is programme, with more than 100
widely considered to be one suppliers already engaged.
of the world’s most complex
engineering challenges.
By 2020, it is estimated that

between 5,000 and 6,000
BAE Systems staff will be
working on Dreadnought
and the Company has made
a significant investment in
the site’s operating systems,
facilities, local education and
skills to ensure it has the
capacity needed to deliver
the Dreadnought Programme.
Its new training facility, built
to support the programme,
will open its doors next year.
At nearly 8,000m2, the new
Central Training Facility will
provide a bespoke learning
environment for the almost
1,000 craft and technical
apprentices that are currently
in training. These include those
in mechanical, steelwork and
electrical disciplines. It will also
serve as a training centre for
the wider workforce.
60
14,000
5.3 NORTH WEST BAE Systems’ activity Fig. 22: BAE Systems’ employees by local authority of residence in the North West region
supported a total of 14,000
The North West region is FTE jobs in the region,
home to the Warton and equivalent to one in every 38
Total FTE jobs supported in the Samlesbury sites, both active FTE jobs in the area (Fig. 21).
North West by BAE Systems in the military aircraft business. The Company itself created
The military aircraft business almost 9,800 FTE jobs, with
is primarily involved in the a further 1,200 supported Military aircraft, Preston
For every 10 FTE jobs at defence aerospace sector and in its supply chain, and a Shared Services, Preston (Channel Way)
BAE Systems, 14 were supported can trace its roots back to the further 3,100 supported
across the region as a whole. very earliest days of aviation. through employees’ consumer
Today, the business designs, spending. The employment
builds and maintains the very multiplier was therefore 1.4 Shared Services, Preston
latest fixed wing combat and for the North West region,
training aircraft for the Royal meaning that for every 10 FTE
Employment (FTE)
Air Force and for customers jobs at BAE Systems, 14 were
Military aircraft, Samlesbury
around the world. In addition, supported across the region
1-200
the North West is home to as a whole, including those
the Shared Services business, directly employed. 201-500
which operates over a number
of sites in the Preston area. 501-1,000
>1,000
Shared Services, Chorley
Fig. 21: BAE Systems’ contribution to employment in the North West, 2016
Military aircraft, Warton
Employment (FTE)
16,000
14,000
14,000 Source: Oxford Economics, BAE Systems
12,000 3,100 3,100
10,000 1,200 1,200
8,000
6,000
9,800 9,800
4,000
2,000
0
62 63
EUROFIGHTER TYPHOON F-35 SUPPLY CHAIN

SUPPLY CHAIN
BAE Systems is a significant SUPPLYING THE the Eurofighter Typhoon. This As a result of its expertise on which went to safety systems BAE Systems not only
partner of the Eurofighter EUROFIGHTER TYPHOON relationship is not limited to legacy programmes, and equipment suppliers. purchases RLC’s products,
Typhoon consortium, PROGRAMME: A&G the trading of components; primarily the Harrier jump Much of this spending has but it also makes a significant
representing a third of total PRECISION AND SONS LTD in the last two years, jet, BAE Systems is a major been with suppliers located contribution to the company’s
production and managing the BAE Systems has also invested partner in the development in the East and South East of development through the
UK final assembly line at its A&G Precision is a supplier of in and worked alongside A&G of the F-35, bringing its England. BAE Systems directly provision of trained employees
Warton site in Lancashire. precision machines and fully to achieve their Continuous wealth of knowledge and employed 1,500 workers on the who share their expertise with
treated components based in Sustainable Improvement Plan, experience in aircraft F-35 programme in the country RLC staff, enabling them to
BAE Systems directly Poulton-le-Fylde, in the North aiming for a shared goal of a engineering, development and in 2016, as well as supporting acquire the latest manufacturing
employed 5,000 people on West of England. Founded in zero defects culture. sustainment. The Company a further 1,900 FTE jobs techniques and capabilities. The
the Typhoon programme 1989, the company has grown is the lead design authority throughout the UK as a result close collaboration between
in 2016. In addition to this, from a one-man operation to on fuel, life support and of its domestic procurement. BAE Systems and RLC has been
a further 9,600 FTE jobs an employer of 65 full-time crew escape capabilities, as of significant mutual benefit:
were supported through the staff, recruiting an average of well as being responsible for SUPPLYING THE F-35 the working relationship has
programme’s UK supply chain, four apprentices a year. building important structural PROGRAMME: RLC (UK) LTD enabled RLC to maximise their
with the Company spending components of the aircraft at machine tool capability and
over £487 million with over The relationship between its Lancashire facilities. RLC Engineering Group is BAE Systems to prepare for
450 domestic suppliers in BAE Systems and A&G began a member of the NWAA the ramp-up in F-35 production
2016. The regions with the 25 years ago and has since As part of the F-35 and a world-class provider during 2017.
largest supply chain spending seen the company grow into programme, BAE Systems of complex manufactured
were the East of England and the largest manufacturing considerably supports the products and integrated supply
Scotland. The procurement employer in the local area. North West Aerospace solutions. The company began
spending included purchase BAE Systems is A&G’s Alliance (NWAA), the largest operations in the 1950s and
of aircraft systems and biggest customer, purchasing aerospace industry cluster in has since grown to reach over
equipment, safety systems approximately 1,900 individual Europe. In total, the Company 1,000 employees and an annual
and equipment and components, many of which spent over £100 million with turnover of over £120 million
13
propulsion systems. are used in the construction of UK suppliers, over a third of in 2016.
64 13
“RLC Group” www.rlc-group.com [accessed 28 June 2017] 65
16,200
5.4 SOUTH BAE Systems has planned Fig. 24: BAE Systems’ employees by local authority of residence in the South region
and delivered significant
The South region is home to infrastructure improvements,
twelve BAE Systems sites, representing over £130 million of
Total FTE jobs supported in the engaging in naval support Ministry of Defence investment. Military shipbuilding, Frimley
Submarines, Ash Vale
South by BAE Systems services, military shipbuilding Locks and docks, mechanical Regional aircraft,
Weybridge
and submarines, as well as the and electrical systems, building Head Office, Farnborough
Company’s Head Office structures and support

For every 10 FTE jobs at in Farnborough. capabilities were upgraded in
BAE Systems, 25 are advance of the arrival of HMS
supported across the region With a proud history, Queen Elizabeth, the Royal
as a whole. particularly around Portsmouth, Navy’s flagship and new aircraft Cyber security and
intelligence, Guildford
the naval support services carrier, into its home port in
business delivers end-to-end August 2017. Military aircraft, Portsmouth
services and support to over

half of the Royal Navy’s Surface The programme will continue
Fleet. The services span fleet in preparation for the arrival Naval support services, Broad Oak
support, equipment and of the second aircraft carrier
Military shipbuilding, Portsmouth
facilities management, training, and future T26 frigates. Employment (FTE)
Naval support services, Cowes
product development and This includes BAE Systems
1-100 Naval support services, Christchurch
through-life support for radar, delivering a new £12 million
Military shipbuilding, Dorchester
torpedoes and small boats. combined heat and power 101-250
facility for the MoD. This facility 251-500 Submarines, Weymouth
Notably, as the estates and will provide the resilience
required when both aircraft >500
facility manager of Portsmouth
Naval Base, BAE Systems leads carriers are berthed alongside, BAE Systems’ sites
a programme to transform as well as controlling energy
the base in order to support costs more efficiently. Source: Oxford Economics, BAE Systems
current and future classes of
ship. Over the past four years, In total, BAE Systems
supported some 16,200 FTE
jobs in the region in 2016, equal
Fig. 23: BAE Systems’ contribution to employment in the to one in every 93 FTE jobs
South region, 2016 (Fig. 23). BAE Systems itself
employed almost 6,600 people
on a FTE basis. In addition
Employment (FTE)
16,200 to this it supported almost
16,000
6,600 FTE jobs as a result
14,000 3,100 3,100 of its regional procurement
12,000 and a further 3,100 FTE jobs
10,000
6,500
through the spending of its
6,500
8,000 staff and suppliers’ staff. The
6,000 employment multiplier was
4,000 therefore 2.5 for the South
6,600 6,600
2,000 region, meaning that for every
0
10 FTE jobs at BAE Systems
Direct Indirect Induced Total itself, 25 were supported across
the region, including those
Source: Oxford Economics directly employed.
66 67
CYBER LONDON (CYLON) CYBER SECURITY

AND INTELLIGENCE
BAE Systems’ cyber security and intelligence business helps ROSS EVANS, CYBER
governments and businesses all around the world to defend SECURITY CONSULTANT,
themselves against cyber crime, cyber attacks and cyber fraud CYBER SECURITY AND
and to work effectively in a fast-evolving, connected, and INTELLIGENCE
integrated world. Its highly skilled workforce creates meaning
from huge volumes of complex data and builds and implements Ross Evans, from Modbury, in
the solutions, systems and processes needed to keep citizens Devon, developed an interest
and companies safe. in cyber security at a young
age—which led him to study
Its development over time reflects the changing nature of the for a degree in Forensic
threat—from mischievous hackers and financial fraudsters, to Computing and Security at
organised criminal networks, international terrorism and attacks Bournemouth University. His
coordinated and sponsored by nation states. Keeping pace with interest in cyber defence led
security in a technological age means understanding big data, to him joining BAE Systems’
modern communications, highly advanced computing and ever- cyber security and intelligence
changing threats, as well as an evolving regulatory landscape. business as a graduate in
January 2016.
BAE Systems’ expertise reflects its long pedigree in tackling
threats to security and its ability to adapt its systems to new Ross and the team he works
environments. It is the leading provider of threat intelligence to with are tasked with making
the UK Government, offering a whole range of services from sure products developed by
Cyber London (CyLon) is a For BAE Systems, the collecting and monitoring a vast amount of information, to first BAE Systems are operating
business accelerator that was partnership is important in line incident response and investigation, to developing next securely and are defended
established to support the the context of innovation— generation cyber security solutions for government bodies and against any potential cyber
growth of cyber security start- it means the Company law enforcement agencies. threats. To stay at the
ups in the UK, by providing can work with some of the forefront of cyber security,
start-ups and early-stage brightest technological In the UK, BAE Systems’ position at the forefront of security he investigates the latest
companies with professional innovators towards the start is reflected in its being one of only a handful of companies technologies and services to
training, mentoring and advice. of their journeys. certified by GCHQ (UK Government Communications ensure BAE Systems and its
BAE Systems’ cyber security Headquarters) and CPNI (Centre for the Protection of National clients are fully protected from
and intelligence business has “It’s fantastic BAE Systems Infrastructure) as a quality-assured cyber incident response any threats of the digital age.
been working with CyLon and CyLon are extending their provider and its being the first company ever to receive
over a series of three-month partnership. Their exceptional accreditation for both threat intelligence and penetration testing In his role, Ross will undertake
mentoring programmes, work supporting small on the Bank of England’s CBEST scheme. The Company also four six-month placements,
offering technical and businesses over the past 18 works in partnership with the National Crime Agency’s (NCA) while being supported by his
business insights to help months has helped a number CEOP Command (formerly the Child Exploitation and Online line manager. He works across
up-skill entrepreneurs and of UK-based cyber security Protection Centre) to prevent the sexual exploitation of children various businesses within the
transform good ideas into start-ups develop.” in the UK and abroad. Company and faces a variety of
operational businesses. Once different challenges daily. Ross
the programme is complete, Rt Hon Matt Hancock MP, UK is presently involved with two
the cohort will take part in a Minister of State for Digital projects: working to increase
demo day, where participating and Culture the cyber security capabilities
start-ups present to a wide of the UK’s defence and
range of leading industry transportation infrastructure.
partners and investors.
68 69
HMS Audacious, the third of

the Royal Navy’s Astute class
submarines is launched from
BAE Systems’ dockyard in
Barrow-in-Furness, Cumbria.
70
6. CONCLUSION
BAE Systems makes a In addition, as reflected by
substantial contribution to its extensive investments in
the UK economy. It does so R&D, BAE Systems is also at
through its own operations, the forefront of technological
its purchases of goods and innovation. Over the past five
services from domestic years, total R&D spending
suppliers and the spending has amounted to £4.4 billion,
of its own workers and those including £1.0 billion in 2016
employed in the supply chain. alone. This investment is
not only vital for continuing
In total, BAE Systems is to deliver technologically
estimated to have supported advanced products to
130,400 FTE jobs in the UK BAE Systems’ clients, but
in 2016, some 27 percent of also creates wider spillover
which were as a result of the benefits in other areas.
Company’s direct operations,
with the remainder of jobs
sustained by BAE Systems’
supply chain and employee
spending multiplier impacts.
The firm also contributed £11.1
billion to UK GDP in 2016,
equivalent to 0.6 percent of
the domestic economy. In turn,
Production of HybriDrive this activity helped to sustain a
technology by BAE Systems’ £2.5 billion tax contribution to
electronic systems business. the Exchequer.
However, our research has

shown that these findings
considerably understate
BAE Systems’ impact on the
UK economy. This study has
discussed numerous channels
through which the firm
generates positive outcomes
to UK society and wider
economy, also aligning with
the current UK Government’s
export objectives.
Representing a growing force in

export markets, BAE Systems
exported some £4.7 billion
worth of goods and services
in 2016, equivalent to about
0.9 percent of all UK exports
in 2016.
73
7. APPENDIX A: DETAILED
LOCAL FINDINGS
ECONOMIC IMPACT OF BAE SYSTEMS ON PARLIAMENTARY CONSTITUENCIES Fig. 26: Major BAE Systems’ sites and number of FTE staff
Fig. 25: Procurement spend and number of suppliers, top 25 parliamentary constituencies Site name Parliamentary Constituency Number of FTE staff
The economic impact of BAE Systems by parliamentary constituency

Barrow-in-Furness Barrow and Furness 7,060
Warton Fylde 5,920
Procurement spend (£m) Number of suppliers Samlesbury Ribble Valley 3,690
Dunfermline and West Fife 272.8 14 Portsmouth Portsmouth South 2,610
Salford and Eccles 225.0 19 Scotstoun Glasgow North West 1,720
Filton and Bradley Stoke 221.9 23 Rochester Rochester and Strood 1,310
Luton South 208.4 12 Guildford Guildford 1,010
Brough Haltemprice and Howden 880
Cities of London and Westminster 183.8 308
Broad Oak Portsmouth North 870
Stevenage 139.7 17
Govan Glasgow South West 830
Edinburgh North and Leith 130.6 14
London Bermondsey and Old Southwark 790
Aldershot 120.6 57
RAF Coningsby Louth and Horncastle 720
Derby South 72.4 7 Frimley Surrey Heath 600
Harlow 67.7 8 Glascoed Monmouth 590
Beaconsfield 62.0 21 Farnborough Aldershot 540
Liverpool, Riverside 57.6 24 Gloucester Tewkesbury 390
Tewkesbury 55.7 23 Filton Filton and Bradley Stoke 390
Wythenshawe and Sale East 53.8 23 Radway Green Crewe and Nantwich 350
Hayes and Harlington 47.4 13 Washington Washington and Sunderland West 300
Barrow and Furness 45.0 70 Telford The Wrekin 280
New Malden Kingston and Surbiton 270
Meon Valley 42.2 48
Cowes Isle of Wight 260
Portsmouth North 39.1 54
RAF Marham South West Norfolk 250
Christchurch 39.1 24
Christchurch Christchurch 230
Crawley 37.3 26
Yeovil Yeovil 220
South West Norfolk 36.7 7
Prestwick Central Ayrshire 210
Coatbridge, Chryston and Bellshill 36.7 10 Leeds Leeds Central 180
Somerton and Frome 32.2 7 The Strand Preston 170
Basildon and Billericay 30.8 13 Hillend Kirkcaldy and Cowdenbeath 170
Yeovil 30.6 19 Chelmsford Chelmsford 150
Fulwood Wyre and Preston North 150
Preston Channel Way Preston 130
Great Baddow Chelmsford 120
Rosyth Dunfermline and West Fife 100
Portway - Preston Preston 90
Weymouth West Dorset 80
RAF Valley Ynys Môn 70
Stirling Square Cities of London and Westminster 50
Dorchester West Dorset 50
74 75
8. APPENDIX B: ECONOMIC
IMPACT METHODOLOGY
Fig. 27: BAE Systems’ staff by parliamentary constituency of residence, top 25 constituencies
ECONOMIC IMPACT MODELLING
Top constituencies by residence of BAE Systems' staff
Parliamentary constituency Number of FTE staff Economic impact modelling is a standard tool used to quantify the economic contribution of an
Barrow and Furness 6,240 investment or a company. Impact analysis traces the economic contribution of an investment
Fylde 2,000 through three separate channels:
Wyre and Preston North 1,200
South Ribble 1,100 • Direct impact – refers to activity conducted directly by BAE Systems in the UK.
Ribble Valley 1,050 • Indirect impact – consists of activity that is supported as a result of the procurement of goods
Preston 780 and services by BAE Systems in the UK, purchases by those companies in turn and so on.
Portsmouth North 720 • Induced impact – reflects activity supported by the spending of wage income by direct and
Chorley 610 indirect employees.
Portsmouth South 500
Fareham 420 Fig. 28: Direct, indirect, induced and total economic impacts
Meon Valley 410
Gosport 390
Haltemprice and Howden 390 Direct impact Induced impact Total impact
Havant 340
West Dunbartonshire 340
Blackpool South 330 Turnover
Isle of Wight 320
Consumer spending Value-added
Blackpool North and Cleveleys 310 out of
Inverclyde 310 employees’ wages: Employment
Rochester and Strood 280 Expenditure by
Blackburn 270 BAE Systems Food and beverages Taxes
Guildford 250 Indirect impact Recreation
Clothing
Chatham and Aylesford 250 BAE Systems UK’s Housing
Aldershot 240 purchases of inputs Houshold goods
Glasgow North West 230 from UK suppliers
R&D spend
Suppliers’ own
Fixed Capital spend
supply chains
Exports
Direct impacts
The direct value added of BAE Systems is calculated as revenues minus the cost of goods
brought in. Value added per employee, a measure of productivity, is a figure derived from dividing
direct value added by the number of FTE employees.
Indirect and induced impacts
Indirect and induced impacts are estimated using an input-output model. An input-output model
gives a snapshot of an economy at any point in time. The model shows the major spending flows
from “final demand” (i.e. consumer spending, government spending, investment and exports to
the rest of the world); intermediate spending patterns (i.e. what each sector buys from every
other sector–the supply chain in other words); how much of that spending stays within the
76 77
economy; and the distribution of income between employment and other forms such as corporate Oxford Economics used the input-output table for the United Kingdom for 2010, provided by the
profits. As these models measure activity within an economy, the direct impact figures will often ONS, for this analysis. This is the most recent input-output table for the United Kingdom.
not match Company annual accounts, which follow accounting standards and rules.
Direct, indirect and induced employment figures in this report have been rounded to the nearest
An input-output model uses a matrix representation of a nation’s interconnected economy to 100 FTE jobs. The multipliers quoted in the report represent the multiple of direct impacts that
calculate the effect of changes by consumers, by an industry, or by others, on other industries and account for total impacts. For instance, if 20 FTE jobs were direct impacts and the total impact
therefore on the economy as a whole. These input-output tables ultimately measure “multiplier multiplier was 2, then the total impact would be 40 FTE jobs. These multipliers are calculated
effects” of an industry by tracing the effects of its inter-industry transactions—that is the value of from the input-output model results.
goods and services that are needed (inputs) to produce each dollar of output for the individual
sector being studied. These models can be used to measure the relationship between an Industry breakdowns
economic change or “shock,” and the final outcome across the whole of the economy.
The UK 2010 input-output table is divided into 105 different industry sectors, and the table shows
In essence an input-output model is a table which shows who buys what from whom in the how each sector interacts with the 104 other sectors. For purposes of illustration to show value
economy. Fig. 29 provides an illustrative guide to a stylized input-output model. added and employment supported across different sectors, the 105 different industries have
been pooled into 19 broad industry categories. For example, the professional services industry
Fig. 29: A stylised input-output model amalgamates the following sectors:
• Legal services
Industry Industry Industry Consumer Other Final Total
• Accounting, bookkeeping and auditing services; tax consulting services
Spending Demand Outputs • Services of head offices; management consulting services
1 2 3
• Architectural and engineering services; technical testing and analysis services
Industry 1 C 1,1 C 2,1 C 3,1 C 4,1 C 5,6,7,1 C 8,1
• Scientific research and development services
• Advertising and market research services
Industry 2 C1,2 • Other professional, scientific and technical services
• Veterinary services
Industry 3 C1,3
Regional models
Input-output models can also be made to measure regional impacts. In this case, ratios of local
economic activity to national economic activity known as “location quotients” are calculated,
in order to calibrate the national input-output model to describe each region in terms of the
employment impact and to calculate employment multipliers per region.
Employment C 1,4
Incomes This process was adopted in order to develop employment contributions for the Central Belt of
Scotland, South Cumbria, the North West and the South regions. As noted at the beginning of this
Profits C1,5 report, an important difference with our previous work is this study assesses the local impact of
BAE Systems as a whole, rather than the local impact of BAE Systems’ local sites. For this reason,
the reader should not directly compare our 2015 results with this study’s findings.
Leakages C 1,6,7
Total Inputs C 1,8
78 79
OXFORD ECONOMICS
Oxford Economics was founded in 1981 as a November 2017 Taranis is an unmanned
commercial venture with Oxford University’s All data shown in tables and charts are combat air system
business college to provide economic Oxford Economics’ own data, except where demonstrator programme.
forecasting and modelling to UK companies otherwise stated and cited in footnotes, and First flown in 2013, this
and financial institutions expanding abroad. are copyright © Oxford Economics Ltd. demonstrator is the result
Since then, we have become one of the world’s of 1.5 million man-hours of
foremost independent global advisory firms, All imagery is copyright © BAE Systems plc work by the UK’s leading
providing reports, forecasts and analytical except where stated. scientists and engineers from
tools on 200 countries, 100 industrial sectors 250 UK companies.
and over 3,000 cities. Our best-of-class global This report is confidential to BAE Systems and
economic and industry models and analytical may not be published or distributed without
tools give us an unparalleled ability to forecast their prior written permission.
external market trends and assess their
economic, social and business impact. The modelling and results presented here
are based on information provided by third
Headquartered in Oxford, England, with parties, upon which Oxford Economics has
regional centres in London, New York, and relied in producing its report and forecasts in
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THE

2. GDP contribution and productivity 28

BAE Systems also makes a substantial contribution to the

The economic impact of BAE Systems is widely spread around

HMS Westminster undergoing

Further detail about the economic impact

In addition, BAE Systems’ activities have wider effects,

BAE Systems’ supply chain 120,000

for every 100 FTE jobs at the 20,000 34,600 34,600

F-35 production underway at Source: Oxford Economics

The great majority of greatest concentration of

Fig. 3: Home locations of BAE Systems’ employees, 2016

Number of FTE employees

BAE Systems’ sites

MILITARY VEHICLE DEVELOPMENT

1.3 SKILLS BASE BAE Systems’ highly skilled

Sophie Harker, GDF graduate

Sophie Harker, Aerospace engineer in Advanced Projects,

“My passion for engineering and technology began when I

SIGMA SCHEME MOVEMENT TO WORK

Through this, its procurement million on machinery and £6-10 million

This is 79 percent of supports significant economic equipment. £11-50 million

some 8,900 suppliers in the have supported 59,900

1.5 CONSUMER SPEND In addition to this, as described

Fig. 7: Induced employment contribution by industry, 2016

2. GDP CONTRIBUTION AND

Fig. 8: BAE Systems’ contribution to UK GDP, 2016

2 4.4 4.4 20,000

2.3 SUPPLY CHAIN Via its supply chain,

PRODUCTIVITY THROUGH in the wider UK economy. As

PEOPLE—AN INITIATIVE TO the Company purchased

CREATE A NATION OF BRILLIANT and services from about

BUSINESS LEADERS 28 percent from firms in the

Activity sustained as workers

Employer NICs 160

Tax contribution (£m) Source: BAE Systems

GUIDES IN ENGINEERING UK SPORT

BARROW SHIPYARD INVESTMENT

Total R&D spending by BAE Systems

Fig. 15: BAE Systems’ R&D spending, 2012-16

MIXED REALITY UNMANNED WARRIOR

REACTION ENGINES LTD

UNIVERSITY OF MAGMA FLAPLESS AIRCRAFT

BAE Systems spent over £15 students BAE Systems’

Region name Sites within Local authorities within 12,000

Source: Oxford Economics

North West Chorley – Shared Services Blackburn with Darwen,

South Ash Vale – submarines Basingstoke and Deane,

Source: Oxford Economics, BAE Systems

BAE Systems’ successful

TYPE 26 powered fleet submarines

Fig. 20: BAE Systems’ contribution to employment in South Cumbria, 2016

BAE Systems’ sites

Source: Oxford Economics, BAE Systems

By 2020, it is estimated that

BAE Systems’ sites

Shared Services, Chorley

12,000 3,100 3,100

10,000 1,200 1,200

Source: Oxford Economics

EUROFIGHTER TYPHOON F-35 SUPPLY CHAIN

Company’s Head Office structures and support

services and support to over

CYBER LONDON (CYLON) CYBER SECURITY