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CSR Report 2003
Our Business - Economic contribution
| Corporate Social Responsibility Report 2003 | |||||||||||||||||||||||||||||||||
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Our contribution to the UK economy BAE Systems is the principal defence contractor in the UK and the Government is one of our major customers. There are concerns about the cost to taxpayers of defence contracts but little is known about the contribution the sector makes to the economy. This is why in 2003 we commissioned a study by Oxford Economic Forecasting (OEF), an independent consultancy, to assess the contribution that BAE Systems makes to the UK economy. OEF studied the wholly owned businesses of BAE Systems and did not seek to capture the economic benefit the UK derives from Airbus and joint venture arrangements with other companies. The study looked at our contribution in 2002, through direct expenditure, for example salaries, tax and procurement. It also examined our indirect contribution. This is the activity and employment supported by supplier companies that sell to BAE Systems. Every year BAE Systems spends around £4 billion with suppliers on equipment, components, raw materials and other goods and services. About 78% is sourced in the UK. Employment was one of the most important contributions noted in the study. BAE Systems employed 39,084 people in the UK in 2002. This is equivalent to total employment in both the office machinery and computer sectors, and represents 1.1% of jobs in the UK manufacturing industry. Indirectly our activity supported a further 49,060 jobs in the supply chain and 22,320 jobs through spending by BAE Systems dependent employees. The company invested £500 million in 2002 in fixed capital, for example buildings and high-technology machinery. This is 160% higher than the UK average fixed capital investment per employee and is an important contribution to the UK economy. OEF looked at our contribution through taxes and export revenues. In 2002 BAE Systems paid £1,150 million in tax in the UK. Exports were worth £3 billion, 1.6% of total UK goods exports. The company imported just under £1 billion in 2002, leaving a positive contribution to UK trade of over £2 billion. This reduced the deficit on the UK’s balance of payments by 11%. In 2002 £1.21 billion was channelled into research and development through BAE Systems by the UK Government and the company. This accounts for around 6% of total UK R&D expenditure and 7.5% of R&D investment by the top 600 companies in the UK. The study found that this spend was used efficiently to generate higher productivity within BAE Systems and across the economy. OEF found that the total value added by BAE Systems to the UK economy was worth £2,294 million. Value added reflects productivity levels and is calculated as the difference between the costs of goods and services bought in and the total pre-tax revenue generated by the company. Our total value added is equivalent to £57,000 per employee, 63% higher than the UK average. This high productivity reflects the company’s fixed investment, research and development spend and employee training as well as the education and skills that employees bring with them into the company. Employees represent a substantial base of intellectual capital and the study noted the investment made by BAE Systems in maintaining and upgrading this capital. Over 21,800 employees received training in 2002 and the company employed 1,100 full-time apprentices, 5% of all engineering apprentices in the UK. Note This paper covers the wholly owned businesses of BAE Systems and therefore does not seek to capture the economic benefit the UK derives from Airbus UK and joint venture arrangements with other companies.
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5,670
2,755