The UK defence industry represents ten per cent of UK manufacturing, is number one in Europe and second only to the US globally, employing over 300,000 people and generating over £35 billion per year to the UK economy. The industry also works hand-in-hand with the UK Armed Forces from factory to frontline, for example over 4,000 industry personnel are currently working with our troops in Afghanistan.

Each year defence exports provide on average £5bn to the UK economy and it is the largest overseas supplier of defence equipment to the United States. The demand from overseas for British-made equipment – from fast jets to helicopters and electronic systems to personal kit for individual troops – is high because of its quality and provenance. Its use by UK forces in recent campaigns also provides confidence to export customers. Defence exports offer the UK a route out of recession and excellent returns on initial investment.

The UK has had a 21 per cent share of the defence export market in the last five years and defence exports support 65,000 UK jobs. Defence in the UK is responsible for 40 per cent of defence R&D in Europe and contributed £12bn in value added to the UK economy in 2008 – up 15 per cent since 2006. The defence industry in the UK submitted more than twice the number of patents applications compared to the pharmaceutical sector between 2007-10.

The major challenges for the industry are:

• To work closely with the Government on the Strategic Defence Review;
• To assist with the reform of the procurement process;
• To encourage the reversal of a decline in research and technology spending; and
• To increase the exportability of UK equipment and services.