The Employment Consequences of a Ban on Arms Exports

The number of people employed in producing arms for export is far fewer than popularly supposed. Also contrary to popular perception, most arms export jobs are located in areas with very low unemployment and hence tight labour markets. There are clearly some locations where there is potential for hardship from a ban on arms exports, however company and public initiatives have been shown to greatly improve the re-employment success of those made redundant. While additional funding would be needed to support these one-off initiatives, this would amount to far less than the ongoing cost of subsidising arms exports. Individual jobs are important but neither the number nor location of relevant jobs justifies the hijacking of the debate over arms exports. Employment arguments are tangential to the government's concerns but, as the only basis on which the general public will support arms exports, the government continues to use them as a justification. There cannot be honest debate about arms exports until the government judges export applications against its own established criteria and is open about its motivations.

 
The 'key findings' below and the following six sections are a summary of a study by Ian Goudie of Defence and Aerospace Analysts, carried out on behalf of the Campaign Against Arms Trade (CAAT). Whilst a number of reports have addressed the economic costs and benefits of the export of UK military equipment, this study considers employment. It seeks to address the maximum job loss scenario given an immediate ban on all UK arms exports. A ban is assumed to result from a political decision. The central element of the study is an analysis of the the dependence on military exports of various regions throughout the UK.

  Key findings

• Employment dependent on the export of military equipment accounts for only 0.3% of total UK employment. This is comprised of 45,000 jobs directly dependent on military exports and 45,000 indirectly dependent. The total of 90,000 is much less than the 240,000 people who leave the unemployment register each month
• Aerospace equipment accounts for over 80 per cent of total UK military exports. One company, BAE Systems, accounts for two thirds (30,000) of all UK employees directly dependent on military exports.
• Arms export jobs are concentrated in the South East, South West and North West of England. The South East and the South West have almost full employment with claimant rates of 1.5 per cent and 2.0 per cent respectively. Overall unemployment in the UK is at its lowest level for 25 years
• A few individual localities, in particular Yeovil in Somerset and Brough in Humberside, are particularly dependent on military exports. The effects of a ban are likely to be sharper in these locations.
• Unemployment for redundant military workers is short for many (typically less than a few months) but long for few. Many of those who are unemployed for a long time accept lower skilled work with lower pay.
• The way in which a company handles redundancy makes a significant difference to the well-being of those made redundant.
• Public policies can play a major role in helping redundant workers find new employment.
• National, regional and local initiatives aimed at assisting redundant workers to find new employment have been successful, in some cases achieving over 90 per cent re-employment within a year.
• Specific assistance programmes may require additional funding but this one-off cost would be much less than the estimated annual cost of subsidising military exports.

  Employment

In mid-2001 the UK employment rate was 74.5 per cent among people of working age. This represents 28.15 million people, up 159,000 on the same period a year earlier. Manufacturing jobs, which would include military export jobs, stood at 3.8 million - down by 123,000 compared with a year earlier.

The principal official measure of unemployment, and the one utilised in this report, is the monthly 'claimant count'. This measures the number of people out of work and in receipt of unemployment-related benefits, Job Seekers Allowance (JSA) and National Insurance Credits. These figures are published by region, by Travel To Work Areas, by counties and local authority areas and by parliamentary constituencies. The majority of those joining the claimant count leave it very quickly - 50 per cent leave the claimant count within three months of joining and over 80 per cent within twelve months.

  UK military export dependency

UK employment dependent on military spending and exports has more than halved since 1980 when some 740,000 jobs were reported as being dependent on such spending. The Ministry of Defence now estimates that some 345,000 jobs are dependent on military expenditure and equipment exports. However only 26 per cent (90,000) of these are reported as being dependent on the export of military equipment, see Table 1. Half of this 90,000 are directly dependent on the exports; the other half are indirectly dependent, i.e. sub-contractors to the prime contractors. As sub-contractors, these jobs are often less dependent on sales to any particular customer.
 

 
Although military industry is often said to represent a major part of the UK manufacturing base, it should be noted that direct military exports account for just over 1 per cent of all UK manufacturing jobs.

BAE Systems

The Department of Trade and Industry reports that there are in excess of 3,500 military and aerospace companies in the UK. The largest of these, by far, is BAE Systems. BAE Systems is a prime contractor and systems integrator in the air, land and sea military market sectors. The company is Europe's largest aerospace and military company with sales of £12.2bn, nearly 100,000 employees (including all Joint Venture employees) and customers in more than 129 countries. 52,000 BAE Systems staff in the UK are dependent on military work, with 30,000 of these being dependent on military exports. BAE Systems regards itself as a global business. Indeed with the government's recent change in policy to allow foreign investors to own more than 50 per cent of the company, the majority shareholding in BAE Systems is now non-UK.

Industrial Sectors

Aerospace - In 2000, aerospace related equipment accounted for over 96 per cent of military equipment exports. Although the amount and proportion will vary on an annual basis, typically more than 80 per cent of military exports come from the aerospace sector. The UK aerospace industry is involved in the design, development, production, repair and maintenance of military and civil aircraft, helicopters, aero-engines and equipment as well as missiles and space systems.

Shipbuilding - The other easily identifiable military sector is that of shipbuilding. Although the UK has a strong maritime tradition and ranked fifth in the list of countries exporting naval ships in the 1980s, with some 12 per cent of total naval transfers, the future looks to be almost exclusively within the domestic market.

  Regional and local military employment

The importance of military exports varies greatly from region to region. As a percentage of manufacturing employment it ranges from 0.002% in the East of England to 6.2% in the South West, see Table 2. Total figures for jobs at risk from a ban on military exports are given in Table 3, along with the present claimant count rate and the maximum rate following a ban. The three most export dependent regions are considered below, along with the two towns likely to be most affected.
 

 
The South West

The South West has a working population of 2.4 million and claimant count rate of 2.0 per cent. Over half of Ministry of Defence military industrial jobs (i.e. those involved in domestic procurement) have been lost since 1987, falling from 27,000 to 14,000. Much of this loss has been at Bristol's BAE Systems and Rolls Royce sites.

It is estimated that 20,610 jobs are dependent on military exports in the South West. If all these employees were to lose their jobs and become claimants there would be a total of 69,410 claimants in the region, around the same number as in 1999 (75,300) or, at 2.8 per cent, approximately the UK average. However if the post-redundancy experience of a 1996 study were to be repeated, then 5,008 would remain unemployed. In that situation the number of claimants would increase to 53,808, or 2.2 per cent.

Yeovil - AgustaWestland, Yeovil, is the UK's only helicopter manufacturer and will employ around 4,300 people once redundancies already announced are completed. Whilst it is difficult to speculate on how many of these jobs are dependent on the export of military helicopters, we do know that the town is heavily dependent on military contracts and in 1992 had more than twice the European average of military dependency. There are presently 669 claimants in Yeovil so any significant job loss at AgustaWestland would have a major impact on the claimant count rate (presently 1.5 per cent for the Yeovil Travel To Work Area).

However unemployment in the town is low and job opportunities in manufacturing do exist. It should also be stressed that given the MoD's reliance on AgustaWestland, for present and future helicopters, and the company's success in both the military and civil sectors, the future of the site is not likely to be at risk from a ban on exports of military equipment.

The South East

The region with the largest number of military export related jobs is the South East, with some 38,340. It is a large diversified economy which has been able to absorb significant military job losses over the past decade. If all 38,340 jobs were lost and all workers 'signed on', the claimant rate would rise from 1.5 per cent to 2.4 per cent -high for the region but still below the national average. However not all of those made redundant would become claimants. A resettlement rate of 75 to 80 per cent was achieved in 1999 and the labour market has become even tighter since then.

If all military export employees were made redundant, most of the local economies in the region would absorb the workforce with little or no government intervention.

The North West

The region, and in particular Preston/Lancashire, has experienced significant military job losses over the years. For example, BAE Systems (then BAe) closed its Strand Road, Preston site in 1990 with the loss of 2,524 jobs and shed 900 jobs at its Warton site and 4,000 at its Samlesbury site in 1999.

At the regional level, the North West has a total of 115,600 claimants, a rate of 3.5 per cent. A mass redundancy of the 16,020 military export jobs could result in a maximum unemployment rate of 4.0 per cent. However there are 46,700 unfilled vacancies in the North West and a major programme of re-employment and re-training would result in a number of these vacancies being filled.

Brough - BAE Systems' site at Brough, home of the Hawk trainer/fighter, is East Yorkshire's biggest employer. Brough is located within the Hull Travel To Work Area, which has 8,259 claimants, a rate of 7.1 per cent. A mass 3,000 redundancies would have a major impact on the local labour market. The worse case scenario would be an increase to 11,259 claimants, a rate of 9.8 per cent, which would be the second highest Travel To Work Area claimant count in England.

Impact of military job losses

The experience of those made redundant can be summarised as follows:

• many cease to be unemployed within a relatively short period, accepting a new job, entering training or education, retiring or voluntarily leaving the workforce, typically within one year.
• those who remain unemployed are likely to do so for a long time: unskilled and older workers have more difficulty finding work; most redundant workers do not move in search of work; the majority of workers accept lower skilled work and lower pay when starting a new job.

 
  Company Redundancy Programmes

Redundancies have taken place in military industry over the past twenty years as a result of military cuts, cost reductions, productivity improvement and corporate restructuring. During this period companies have employed a variety of redundancy strategies ranging from limited consultation and support to full consultation and assistance, often including the use of external consultants and outplacement agencies. BAE Systems, Thales and Rolls Royce have all provided corporate assistance for those made redundant. This has had a significant beneficial impact on the attitude to re-employment and re-training of those losing their jobs.

  The Role of Policy Initiatives

A great deal of help and assistance is available for redundant military workers and this can have a positive impact on the propensity to take up training, secure employment or become self-employed.

Task Forces

Government interventions following announcements of BAe/BAE Systems job losses at Prestwick and on the Clyde took the form of task forces. The Prestwick Task Force consisted of politicians, business leaders and trade unionists, and succeeded in meeting all of the employment targets set. The Clyde Task Force was composed of an even wider range of bodies and considered the strategic issues facing the Clyde shipbuilding industry. It managed to reduce the number of compulsory redundancies and recommended a short-term training and employment subsidy programme to encourage employers to recruit and re-train redundant shipyard workers six months after redundancy.

The Rapid Response Service

The government has established the Rapid Response Service to provide a coherent response to significant redundancies. It is run by a network of Employment Service senior regional managers and is delivered through local partnerships of various organisations including: Regional Development Agencies; Local Learning Skills Councils; Government Offices; the Welsh Assembly and Scottish Executive. The partnership works with the company undergoing a redundancy programme to ensure an appropriate response to the situation. This includes:

• Offering consultancy to the company
• Analysing the effect on the local economy and co-ordinating activities to overcome barriers to re-employment
• Offering information and advice to those affected and developing customised training programmes, where appropriate.

Defence Diversification Agency (DDA)

The DDA was established in January 1999 in response to local authorities and trade unions calling for government action to offset the negative consequences of reductions in military expenditure. A Defence Diversification Council (DDC) was promised to ensure close co-ordination of DDA activities with those of other departments and agencies with responsibilities for industrial sponsorship and regional regeneration, but this has yet to be set up.

A government decision to ban the export of arms could be accompanied by the establishment of the DDC in order to assist companies and local communities in managing the potential impact on jobs and businesses resulting from such a ban.

  Conclusions

Company closures and job losses have become an unfortunate fact of life within many key industry sectors as global markets become even more competitive. As a result of substantial job losses in military industry since 1990, it is no longer a major employer in many of its traditional localities. Only 45,000 jobs are directly dependent on arms exports, with a further 45,000 indirectly dependent. Employment dependent on military exports represents only 0.3 per cent of all employment. Unemployment is at its lowest level in 25 years and many localities with plants exporting military equipment are now experiencing tight labour markets. Although workers are likely to experience short-term unemployment on losing their jobs, many are likely to find a new job albeit at a lower wage, whilst others will leave the workforce to study, retire or look after family. Only a few are likely to remain unemployed for any length of time. Initiatives to manage redundancies have been successful in achieving 90 per cent plus resettlement, though this still leaves around 10 per cent of redundant workers facing severe hardship. This may well be higher in those communities, such as Yeovil and Brough, which are likely to be the most severely affected by an arms export ban.

The task would be to ensure that military companies work in partnership with other organisations to provide the most effective, sensitive and co-ordinated approach to helping people who may lose their jobs. To date all the various stakeholders, including the major military companies, have responded positively to this challenge.

The most co-ordinated scenario would be for the government to establish a UK Task Force to address the impact on jobs and communities as a result of a ban on the export of arms. A number of such task forces have been established to manage previous military and aerospace redundancies. The aim of these was not to convince military and aerospace companies to change their position but to assist workers and their communities to diversify. With a government policy of banning the export of arms, the political 'will' would be there to assist those workers and communities affected.

Specific programmes may need to be considered for those workers who do not find re-employment swiftly. This could include the short-term training and employment subsidy programme proposed by the Clyde Shipyard Task Force. Whilst such programmes would require additional funding, the one-off £3,350 maximum cost of a £2,600 wage subsidy and a £750 training allowance is much less than the £8,500 estimated annual cost of subsidising each military export job and could be considered as an investment worth making.

September 2002