Strength through Specialisation: Defence as Remedy for the Productivity Gap

Switzerland is often noted for its banking sector. Maybe it's the exclusivity, or the scale, or even the shady stories of undisclosed foreign finance. It is for certain however, that banking plays to the Swiss' strengths while avoiding their weaknesses, and that, as a nation, they’ve gone all in.

The UK has to find its own niche. An industry that can help close the ever-pressing productivity gap while playing to the nation's strengths. I propose that an expansion in the defence sector is the kind of area the government should sit behind and push hard for.

Specialisation should be key focus in such an approach, the diverse range of slowly dying industries should be left to disappear with the resulting labour force quickly trained and put back to work.

Currently, the UK is the 6th most highly educated country in the world. As such, it's understandable UK workers will not enter industries whose wages will continue to be buoyed down by cheaper economies. The decades-long push to a service economy has obviously failed to bring about any meaningful edge over our European neighbours. Something heavily based in exported manufacturing goods that also provides high wages for a well educated population would be a godsend for a stagnating economy.

Defence has always been a stable industry, with there always being conflict somewhere in the world in which the UK has an interest in the losers and winners. This means the industry has higher job stability throughout economic crises, something the UK has been particularly vulnerable to. It also provides the 'soft power' that continues to slip away. The ability to partly control a nation's access to the defence industry would certainly give the UK more of a voice on an international stage.

The UK's ties with the US already provides the perfect partner with which investment, ideas, and capital could flow. The UK has proved recently that it can still develop novel defence technologies. This means the nation not only has a potential industry partner, but proves the UK can still stand out in its development and export of weapons without being completely overshadowed by the US' staggeringly larger defence industry.

In 2022, UK civil aerospace turnover totalled approximately $34.5 billion, $15 billion of which was from exported goods. With domestic defence spending at 2.2% (with promises of an increase to 2.5%), a pivot to a strongly government backed private defence industry wouldn't have to begin from nothing. The infrastructure and businesses already exist, but strong backing is needed to allow it to become one of the UK's primary industries.

One method of producing this backing is through labour reallocation programmes into the private defence industry, alongside large government contracts that coincide with an increase in domestic defence spending. In addition, the government should take advantage of the already highly educated population by growing R&D programmes. For example, expansions to already existing programmes such as DASA and DSTL could provide obvious progression pathways for postgraduates into the workforce while also creating opportunities for foreign and domestic investors.

Like Switzerland, the UK must look its weaknesses in the eye and decide how best to minimise them. We must accept that the nation will never have low enough wages to compete with foreign nations on steel production, or the natural resources to dig up lithium. Thus, the UK should at least attempt to play to its main strength: a highly educated population. 

Investing heavily in defence could be considered "putting all your eggs in one basket" and rightfully so. If the nation had such a reliance on the defence industry and all conflicts disappeared overnight, the UK would be in dire straits. But unlike coal, conflict will not clear up with time. Global conflicts have been on the rise in recent years. The sums of money moved into Ukraine since their invasion has been unprecedented. Instead of hoping the conflicts will clear themselves up, the UK should take advantage of their ever-present nature and find a way to dig itself out of its productivity gap at the same time.

This article's cover depicts a F.6 XS897 (Electric Lightning) in the static at RAF Lakenheath's airshow of 1975, the plane being a great example of the UK's history in military engineering. Image taken by Michael Hall.

All articles and opinions posted give the views of the author(s) and do not necessarily reflect the views of the Leeds Think Tank, the Leeds University Union, or the University of Leeds.