National statistics

MOD trade, industry and contracts: 2023

Updated 15 February 2024

The Finance and Economics Statistical Bulletin series provides figures on the composition and scope of the Department’s expenditure, information on the impact of defence spending on the wider economy, and compares MOD’s spending to that of other departments and countries.

Trade, Industry and Contracts presents information on MOD spending with industry and commerce, and sets out the numbers, types and values of contracts placed by MOD, major equipment projects and payments made by MOD to its suppliers including via Foreign Military Sales (FMS) agreements with the US Government during 2022/23. Also included is a focus on the top ten companies that received the highest expenditure from MOD. Industry tables provide details of existing Private Finance Initiative (PFI) contracts. Trade data presents information on defence export orders.

1. Key Points and Trends

£33.0 billion	Paid by MOD Core Department to UK and foreign owned organisations in 2022/23 (excludes FMS).
	An increase of £4.3 billion from 2021/22.
£0.7 billion	Value of payments made via Foreign Military Sales (FMS) agreements with the US Government in 2022/23.
	This is a nominal decrease of £343 million from 2021/22.
39%	Percentage of MOD Core Department payments through non-competitive sourcing (excludes FMS).
	This is up from 37% in 2021/22, and makes non-competitive contracting the predominant in-year sourcing method.
£13.2 billionr	Value of new contracts placed during 2022/23.
	A decrease of £5.3 billionr from 2021/22, owing to only one new contract let over £1 billion in value, down from five in the previous year.
37%	Total MOD procurement expenditure with top ten suppliers in 2022/23.
	A decrease from 42% in the previous year.
£11.2 billion	Estimate of identified UK export orders of defence equipment and services in 2022.
	An increase of £4.6 billion from 2021, principally from new contracts placed with the Middle East and Europe.

Responsible statistician: Analysis-Expenditure Head of Branch

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2. Introduction

This bulletin examines data relating to MOD’s spending on equipment and services. It is produced as part of the transparency and accountability of the Ministry of Defence to Parliament and the public. Detailed statistics and historic time series can be found in the related Open Data Source tables.

2.1 Section removal

This edition of the Trade, Industry and Contracts bulletin excludes the section on Top Defence Exporters. The underlying data from the Department for Business and Trade’s UK Defence and Security Exports (UKDSE) survey provides a level of coverage and detail for UK exports that is not available from other sources used for the rest of the world. This means that data on UK defence exports is based on a different methodology to figures on non-UK defence exports. For this reason, defence exports data for the UK and the rest of the world are not comparable with one another, and so cannot be used to draw conclusions about the UK’s ranking among other exporters.

2.2 Context

The information in this bulletin has a wide range of users including the media, politicians, academic researchers and the general public who use the information to:

• understand the size and distribution of payments made to organisations by the MOD.
• set the context for other information on Defence.
• assist in understanding the impact of changes in Defence policy, for instance changes to Single Source procurement practice.

In the report we will analyse the level of payments made to organisations and holding companies by MOD and its Trading Fund / On-Vote Defence Agency. Trading Funds are self-accounting units that have greater freedom than other government departments in managing their own financial and management activities. Since 2017/18, the only Trading Fund is the United Kingdom Hydrographic Office (UKHO). The Defence Science and Technology Laboratory (Dstl) ceased to be a Trading Fund in April 2017, becoming an On-Vote Defence Agency of the MOD through which it continues to run its own financial activities. For the remainder of this bulletin, we will therefore refer to payments as either by:

MOD – All entities within the MOD Department Boundary, including UKHO and Dstl. Data is drawn from payments made through DBS Finance Systems and separate financial data provided by UKHO and Dstl.

MOD Core Department - Entities within MOD Departmental Boundary but excluding payments made by UKHO and Dstl. This will refer to payments made through DBS Finance systems.

2.3 Accredited Official Statistics publication

Accredited Official Statistics are called National Statistics in the Statistics and Registration Service Act 2007. These Accredited Official Statistics were independently reviewed by the Office for Statistics Regulation in June 2020. They comply with the standards of trustworthiness, quality and value in the Code of Practice for Statistics and should be labelled ‘Accredited Official Statistics’. Accreditation can be broadly interpreted to mean that the statistics:

• meet identified user needs;
• are well explained and readily accessible;
• are produced according to sound methods; and
• are managed impartially and objectively in the public interest.

Further information on the accreditation process can be found from the Office for Statistics Regulation. Once statistics have been designated as Accredited Official Statistics it is a statutory requirement that the Code of Practice shall continue to be observed. Further details about how this report has been developed since its confirmation as an Accredited Official Statistic can be found in the Background Quality Report.

Our statistical practice is regulated by the Office for Statistics Regulation (OSR). OSR sets the standards of trustworthiness, quality and value in the Code of Practice for Statistics that all producers of official statistics should adhere to.

You are welcome to contact us directly with any comments about how we meet these standards.

Alternatively, you can contact OSR by emailing regulation@statistics.gov.uk or via the OSR website.

3. Major Equipment Projects

This analysis looks at MOD’s 16 largest equipment projects on which the main investment decision has been taken (post ‘Main Gate’). The commentary reflects the affordability of spending plans for equipment procurement and support as at 31 March 2022.

It presents the affordability of plans following the strategy and financial reset provided by the Integrated Review and Spending Review, with projects supported by the multi-year financial settlement announced for Defence in November 2020.

Figure 1: CADMID Cycle

Diagram showing the CADMID cycle (Concept, Assessment, Demonstration, Manufacture, In-Service, and Disposal), which is the basis for MOD Smart Acquisition.

Smart Acquisition is a long-term MOD initiative to improve the way we acquire defence capability. The main investment decision and Major Project Approval is taken at Main Gate, meaning the post-assessment phase, with the aim of ensuring there is a high level of confidence in achieving time, cost and performance targets. Further information is contained in the MOD Equipment Plan.

There are two changes to the project population from 2021. Lightning II (Fighter/Attack Aircraft) and P-8A Poseidon (Maritime Patrol Aircraft) have been removed having successfully met their in-service date. There are no new additions to the project population in 2022.

The total current forecast cost of the 16 projects in the MOD’s Project Performance Summary Table (PPST) 2022 is £58.8 billion. ‘Dreadnought’ was the most expensive post Main Gate equipment project in 2022, with a forecast cost of £21.9 billion.

Project teams produce cost forecasts using quantitative risk analysis to model the range of cost outcomes for projects. The cost forecasts are made at a confidence level where there is an equal chance of actual costs being above or below the forecast amount.

Figure 2: Forecast Costs of 16 Major Equipment Projects as at 31 March 2022

Source: Project Performance Summary Table 2022

Horizontal bar chart showing the current and original forecast costs of the 16 major equipment projects. The Astute Boats 4-7 project has the largest increase in forecast costs since its original forecast.

Forecast costs for several projects have changed this year. The greatest increase was for the Mechanised Infantry Vehicles project which rose by £543 million compared to the previous year. This was primarily due to extra costs associated with delivering an additional 100 Boxer vehicles in line with outcomes of the Integrated Review. Forecast costs for Type 26 Frigates increased by £259 million from 2021, which is due to a combination of contractor performance issues, supply chain problems and COVID-19 delays, alongside changes to risk and escalation estimates. The greatest decrease in forecast costs was in E7 Wedgetail, which decreased by £194 million owing to the reduction of fleet size from five to three aircraft.

Further details on the project changes can be found in The Defence Equipment Plan.

4. MOD Expenditure by Type of Contract

This section looks at the expenditure made to organisations and holding companies under the terms of competitive and non-competitive contracts. Set up in 2014, the Single Source Regulation Office (SSRO) regulates the procurement by the UK government of ‘single source’ (non-competitive) military goods, works and services.

In 2022/23, a total of £33.0 billion was paid by MOD Core Department to UK and foreign owned organisations (including defence suppliers and intermediate bodies). This is a nominal increase of £4.3 billion from 2021/22.

This figure includes direct MOD payments to the UK Hydrographic Office. Prior to 2017/18 this expenditure figure also included payments to the Defence Science and Technology Laboratory. However, Dstl ceased to be a Trading Fund in April 2017 and are therefore no longer paid through contracts processed by DBS Finance Systems and are instead funded through the central MOD budget.

Figure 3: Direct MOD Core Department Payments by Type of Contract in 2022/23 (VAT Exclusive)

Source: DBS Finance data sources

Pie chart showing MOD Core Department payments split by competition marker; Competitive, Non-Competitive, or Other/Unknown. Non-Competitive payments make up the largest segment at 39% (£12.9 billion).

Out of all MOD Core Department expenditure in 2022/23, 37% of spending went to organisations following a competitive bidding process. This is down from 39% of in-year spend through competitive sourcing in 2021/22. Since spending recorded via means where no competition marker is available has remained unchanged over the same period, it can be seen that there has been a slight shift to non-competitive payments in the latest figures, and it represents the first time non-competitive contracting has been the predominant in-year sourcing method since this bulletin began in 2013/14.

4.1 Other Expenditure

Other expenditure consists of payments made by means of miscellaneous transactions. These are agreements for goods and services that have been set up locally between MOD Branch and the supplier, and are legally binding, but do not have a competition marker recorded. Also included in this category are payments made to international projects such as the NATO Eurofighter Tornado Management Agency (NETMA) and the Organisation for Joint Armament Co-operation Executive Administration (OCCAR), payments made through the electronic Purchasing Card (ePC), as well as payments made to overseas governments and UK government departments. Contracts where the competition status is not known are also included within ‘Other’.

5. Foreign Military Sales Expenditure with United States Government

This section looks at MOD expenditure made via Foreign Military Sales (FMS) agreements with the United States Government. FMS is one mechanism used to purchase equipment from the US Government and can assist the UK MOD in gaining access to technologies that would otherwise not be available. It is generally used either due to US security constraints, or for cost savings due to economies of scale. For example, adding to an existing US and/or international procurement order can prove more cost effective than if the UK MOD were to source with suppliers separately.

FMS expenditure in this section is exclusive of all other sections, therefore it is not included within the total paid by MOD Core Department to UK and foreign owned organisations in 2022/23, nor is FMS expenditure included within the payments to the United States within Table 3a of the supporting data tables. Payments to the United States included in Table 3a (£1,262 million to the US Government and £428 million to the US Treasury) are predominantly for F-35 and Trident systems and are through international collaborative agreements.

In 2022/23, expenditure on FMS agreements totalled £733 million. This is a nominal decrease of £343 million from 2021/22, owing mainly to a decrease in P-8A Poseidon payments upon delivery of the final aircraft to the RAF fleet.

Figure 4: Amount Spent Through Foreign Military Sales Agreements with the US Government 2018/19 to 2022/23

Source: UKDPO data sources

Stacked bar chart showing MOD expenditure via Foreign Military Sales (FMS) agreements with the US Government by project since 2018/19. Total FMS spending increased every year until 2022/23 where there is a decrease due to a drop in P-8A spend.

Note:
Acronyms used are AMRAAM = Advanced Medium-Range Air-to-Air Missile, and RPAS = Remotely Piloted Aircraft Systems.

The top two projects under the FMS portfolio in 2022/23 were Apache at £198 million and Remotely Piloted Aircraft Systems (RPAS) at £120 million. Apache was announced in 2016 and has already delivered equipment to the Army. It will be fully upgraded to a state-of-the-art capability by 2025. Sixteen new Protector (RPAS) aircraft have been ordered and are expected to enter service in the RAF by 2024.

6. Organisations Paid over £5 million by MOD

This analysis presents payments made by the MOD to UK and foreign owned organisations, including defence suppliers and intermediate bodies. These organisations include UK and overseas defence contractors, overseas governments and other UK government departments, but exclude FMS payments to the US Government. DBS Finance is responsible for the majority of payments made by MOD, around 95% by value, whilst UKHO and Dstl make their own payments. Some organisations have been excluded from the analysis because their information has been redacted in line with Transparency rules.

There were 424 organisations paid more than £5 million by MOD during 2022/23, 61 more than the previous year.

Figure 5: Organisations Paid over £5 million in 2022/23

Source: DBS Finance, UKHO and Dstl data sources

Bar chart showing combined spend and count of suppliers by payment bracket. Whilst the majority of suppliers receive amounts in the lowest banding between £5 million and £10 million, most spend is with just a few suppliers in the largest bracket (over £500 million).

The organisations that received more than £5 million represent around 4.3% of the 9,900 organisations paid in 2022/23, however they received 94% of the direct expenditure. Furthermore, payments are heavily skewed to a small number of suppliers, with the top 21 receiving around one half of the total procurement expenditure. A similar distribution of MOD’s supplier expenditure was seen in 2021/22.

Only 24 suppliers received payments of over £5 million from either UKHO or Dstl.

Payments which are not in the figures include those from British Defence Staff (United States) and those made through local cash offices.

7. Holding Companies Paid over £50 million by MOD

Many of the suppliers paid by MOD are subsidiaries of larger holding companies. The term ‘holding company’ refers to companies which are full or part owners of other companies (subsidiaries and joint ventures). Payments to joint ventures have been allocated to their parent holding companies in proportion to their equity holdings. This analysis excludes payments made to public sector bodies, government departments and agencies, local authorities, UKHO, multi-nation project management agencies, charities and associations. Some organisations have also been excluded from the analysis as their information has been redacted in line with Transparency rules. All other holding companies paid more than £50 million by MOD in 2022/23 are presented below.

It is important to note that figures in the following sections are for payments made by MOD directly to holding companies. It excludes the indirect MOD expenditure to holding companies which are made through Foreign Military Sales (FMS) agreements with the US Government, international collaborative agreements (such as NETMA and OCCAR) and industry supply chain payments. For example, The Boeing Company is the prime supplier for Apache and P-8A Poseidon, but these projects were procured by MOD through FMS payments to the US Government, totalling over £275 million in 2022/23, so this spend would not be included within the Boeing spend figure.

In 2022/23, there were 70 holding companies paid more than £50 million by MOD, 11 more than in 2021/22. The total combined expenditure with these holding companies in 2022/23 was £20.9 billion, representing 61% of the total expenditure by MOD and its trading funds. This includes eight companies paid over £500 million which is unchanged on the previous year.

Figure 6: Holding Companies Paid over £50 million by MOD in 2022/23

Source: DBS Finance, UKHO and Dstl data sources

Tree map showing the holding companies paid over £50 million by MOD in 2022/23. Of the 70 organisations displayed, BAE Systems PLC received the highest amount.

8. Focus on Key Suppliers

This section explores the nature and scope of MOD business with its key suppliers within industry and commerce. It focusses on the ten holding companies who received the most expenditure from MOD during 2022/23. It examines the relative importance of MOD sales to company revenues, how this has changed over time, and the amount of MOD business that comes from competitively let contracts.

8.1 Expenditure with Top Ten Suppliers

In 2022/23, over 37% of total MOD procurement expenditure was with ten suppliers. This split is a decrease compared to the 42% seen with the top ten suppliers in 2021/22.

Figure 7: MOD Procurement Expenditure with Top Ten Suppliers in 2022/23

Source: DBS Finance, UKHO and Dstl data sources

Horizontal bar chart showing that 37% of MOD procurement expenditure was with the top ten suppliers in 2022/23.

The General Dynamics Corporation returned to MOD’s list of top ten suppliers in 2022/23 after falling out of this grouping last year. Payments to the company for Ajax vehicles were resumed after being withheld since December 2020 due to ongoing challenges with noise and vibration. The vehicles are scheduled to enter initial operating capability in 2025. Ferrovial SA dropped out of the list of top ten suppliers in 2022/23 due to its sale of the Amey group to Project Ardent Bidco Ltd.

Figure 8: Proportion of MOD Spend with Top Ten Suppliers in 2022/23

Source: DBS Finance, UKHO and Dstl data sources

Bar chart showing the percentage of total MOD procurement spend in descending order for the top ten suppliers in 2022/23. 13.5% of MOD procurement spend was with BAE Systems PLC, decreasing down to General Dynamics at 1.3%.

BAE Systems PLC was the largest defence supplier in terms of annual spend made by MOD, a position which has not changed for over a decade. This top spot was further reinforced after they received £569 million more in 2022/23 compared to the previous year, the largest nominal increase out of the top ten holding companies. In total, BAE Systems PLC received just under £4.6 billion of the total MOD spend in 2022/23.

8.2 Dependency on MOD Business

This section aims to demonstrate the dependency of the top ten suppliers on MOD business by presenting total payments received from MOD as a percentage of their global company revenues.

Babcock and QinetiQ dependency on MOD business remains at over 50% in 2022/23.

Figure 9: Dependency on MOD Business for MOD’s Top Ten Suppliers in 2022/23

Source: DBS Finance, UKHO and Dstl data sources

Line graph showing the dependency of the top ten suppliers in 2022/23 on MOD business since 2012/13. QinetiQ has shown the largest variability over the past decade, ranging from 34% in 2012/13, to a high of 69% in 2014/15.

Note:
Top ten supplier data labels not displayed: (In descending order) Leonardo, Leidos, Thales, Airbus, General Dynamics and Boeing.

In 2022/23, 54% of Babcock International PLC’s global revenue came from direct MOD spend. This is a slight decrease from their peak dependency over the past decade of 57% in 2020/21. This is despite MOD spending with Babcock continuing to rise which can in part be attributed to payments on Future Submarines, and the Future Maritime Support Programme (FMSP) which replaces the previous Maritime Support Delivery Framework (MSDF) for naval base operations, and submarine and surface ship fleet support.

QinetiQ Group PLC remains the most dependent of the top ten suppliers on MOD business with 62% of its global revenue coming from MOD payments in 2022/23. This figure has remained broadly consistent since 2014 when QinetiQ sold its US Services business, which has previously been responsible for around 30% of the company’s global revenue.

MOD’s highest paid supplier, BAE Systems PLC, has seen its dependency on MOD business remain relatively consistent at around 20% since 2013/14, with a slight peak of 23% in 2014/15.

For the remaining seven suppliers, MOD sales accounted for less than 10% of their global revenue.

8.3 Levels of Competitive Contracting

This section looks at the level of competitive expenditure for MOD’s top ten suppliers relative to their non-competitive spending. Importantly to note, any MOD expenditure with these suppliers received through means without a competitive indicator is excluded from the analysis. See the MOD Expenditure by Type of Contract section for more details on the types of competitive contracts and the exclusions under ‘Other Expenditure’.

The amount of competitive contracting depends on the type of company involved. Service based companies, such as Leidos, receive almost all their work through competitive contracts. The more recognisable defence focussed companies hold a lower proportion of competitive contracts by value. Some of these defence companies receive payments almost exclusively through non-competitive contracts.

Figure 10: Levels of Competitive Contracting with MOD’s Top Ten Suppliers in 2022/23

Source: DBS Finance data sources

Line graph showing the percentage of competitive relative to non-competitive contracting with MOD’s top ten suppliers in 2022/23, from 2013/14 to 2022/23.

Note:
These calculations exclude any contract expenditure where the competition status is unknown. Combined across all of MOD’s top ten suppliers, the unknown competitive spend of contracts in 2022/23 was £69 million. Figures also exclude miscellaneous transactions, ePC payments and Trading Fund expenditure. Therefore, competitive breakdowns shown here may differ from those shown in Table 4a of the ODS tables.

Over the past decade, BAE Systems PLC has seen a significant change in its percentage share of payments received from competitive contracts, dropping from 11% in 2013/14 to 5% in 2017/18. This figure remained relatively low before an increase to 12% in 2022/23.

The percentage share of competitive contracts for General Dynamics Corporation has increased to a high of 91% in 2022/23. This follows a low of 20% in 2021/22 due to MOD’s paused payments for Ajax vehicles in 2020.

Leidos Holdings Inc was created following the split of the Science Applications International Corporation (SAIC) into Leidos and the new SAIC in 2013. In its first few years Leidos received minimal payments from MOD totalling under £5 million annually which were nearly all non-competitively sourced. In 2015, Leidos won a competitively placed contract with a value of £6.3 billion for the transformation of MOD’s logistic and commodity procurement services. Ongoing expenditure recorded against this contract has since seen the company’s level of competitive contracting with MOD dramatically switch from near zero to over 95%.

QinetiQ’s rising competitive percentage since 2018/19 can be attributed to their successful bid for, and increasing expenditure against, the Engineering Delivery Partnering contract. Through this contract, the company has become the default route for the procurement of engineering services for Defence Equipment and Support (DE&S).

9. New Contracts Placed

MOD Core Department places numerous contracts each year for a range of goods and services, including major equipment projects, infrastructure, and service support. This section provides an analysis of all new contracts placed by MOD Core Department broken down by whether they were let competitively or non-competitively. It further explores the level of new contracts placed with Small and Medium-sized Enterprises (SMEs).

Note: Revision A revision of both the total number and value of contracts let in 2022/23 was made in February 2024. This was to account for delayed reporting of new contracts.

9.1 New Contracts by Competition Indicator

MOD Core Department placed 2,382 new contracts in 2022/23 with a collective value of £13.2 billion^r. This is a decrease of £5.3 billion^r compared to the previous year despite it being 157 more contracts in number.

Figure 11: New MOD Core Department Contracts by Competition Indicator 2006/07 to 2022/23

Source: DBS Finance data sources

Time series showing the number of new contracts let by financial year relative to their combined contract values since 2006/07. The number of new contracts is presented as stacked bars to highlight the breakdown by competition indicator. Data for 2022/23 has been revised.

The number of new contracts let each year decreased rapidly between 2009/10 and 2015/16. This historic reduction in the number of new contracts let by MOD was due to several factors including the increased use of Crown Commercial Service contracts and the privatisation of functions such as the military logistics capability and the Defence Support Group (DSG).

The value of new contracts placed can be quite volatile and so readily fluctuate year-to-year. It can be affected by particularly high value contracts, for example the 2015/16 figure was inflated by a £6.3 billion contract with Leidos Europe, which accounted for around 40% of the total value of contracts placed in that year.

In 2022/23 there were 19^r new contracts let over the value of £100 million, with a combined total of £6.3 billion^r. This compares to the 25 contracts awarded above this value the year before at a combined total of £13.3 billion.

Only one contract in 2022/23 had a value of over £1 billion, and this was placed with Team Resolute for Fleet Solid Support (FSS). The British-led Team Resolute, comprising BMT, Harland & Wolff and Navantia UK will provide support ships designed to deliver munitions, supplies and provisions to the Royal Navy. In the previous year there were five contracts awarded above this same threshold with a collective total of £6.7 billion.

9.2 New Contracts with Small and Medium-sized Enterprises

This section provides an analysis of the value and number of new MOD Core Department contracts with Small and Medium-sized Enterprises (SMEs) compared to all new contracts let in-year. Suppliers are classed as an SME or not according to the Organisation for Economic Co-operation and Development (OECD) definition of SMEs as companies with an annual turnover of less than €50 million and fewer than 250 employees. This definition is consistent with that used by the Cabinet Office.

MOD Core Department placed 751^r new contracts with SMEs in 2022/23 with a collective value of £1.2 billion^r. This is an increase of 41^r contracts and £0.5 billion^r compared to 2021/22.

As laid out in the Defence SME Action Plan, the MOD had a target that 25% of its procurement spend would go to SMEs by 2022. Details published in MOD’s Regional Expenditure with Industry bulletin showed that 5% of MOD expenditure with UK industry in 2022/23 was with SMEs. Note however that this includes direct expenditure only and therefore does not account for indirect spending with SMEs in their support of the whole defence supply chain.

Figure 12: New MOD Core Department Contracts with SMEs by Competition Indicator 2018/19 to 2022/23

Source: Dun and Bradstreet, and DBS Finance data sources

Time series showing the number of new contracts let with Small and Medium-sized Enterprises relative to their combined contract values since 2018/19. The number of new contracts is presented as stacked bars to highlight the breakdown by competition indicator. Data for 2022/23 has been revised.

In terms of the number of contracts placed with SMEs relative to all new contracts, this remained fairly consistent between 2018/19 and 2020/21 at around 37%. The number of new contracts let with SMEs fell substantially in 2021/22 to make up only 32% of newly awarded contracts. This split is unchanged for 2022/23.

Compared to all new contracts placed in 2022/23, contracts with SMEs are let on a slightly more competitive basis. 57% of new contracts with SMEs went to organisations following a competitive bidding process compared to 53%^r of all new contracts.

The combined value of new SME contracts in 2022/23 has increased by £476 million^r on last year. Even though the value of competitively placed SME contracts has risen by £215 million^r they now only account for 61%^r by value, down from 72% last year, with a shift towards non-competitive contracting.

It should be noted that with a short time series, any trends could be due to the inherent variability of contract data and not indicative of a long-term trend. Therefore, these comparisons should be used with caution.

10. MOD Payments on Private Finance Initiative Projects

This section provides an analysis of Private Finance Initiative (PFI) payments by MOD during 2022/23. PFI is a system for providing capital assets (such as buildings, vehicles, equipment and water systems) for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets, and then operates those assets to sell services to the public sector.

The values in the chart below represent payments made against contracts relating to PFI projects. The PFIs presented are ‘signed’ MOD projects from the HM Treasury PFI database as at April 2018. Although this is an historic list of PFI projects, the Chancellor announced during the 2018 Budget that the UK government would not use PFIs for any new projects. We can therefore be sure of capturing ongoing PFI spending using the latest list of PFI contracts and drawing in-year payment data against them from DBS Finance’s contract expenditure database.

A total of £2.3 billion of payments was made across 36 PFI projects in 2022/23, equivalent to 7% of all MOD Core Department expenditure. This is compared with payments of £2.4 billion across 37 projects in 2021/22, one project less due to final payments being made on the 15-year PFI for ‘C’ Class Vehicles.

Figure 13: Amount Spent on PFI Projects in 2022/23

Source: DBS Finance data sources

Tree map showing the amount of MOD spending on Private Finance Initiative projects that received more than £5 million in 2022/23. It shows that the two largest projects were the Future Strategic Airtanker Aircraft and Allenby/Connaught.

The Future Strategic Tanker Aircraft PFI was in receipt of the highest amount of MOD expenditure in 2022/23 at £502 million. This is the most recent MOD PFI to come into operation, starting in 2012, and it maintains its ranking as top PFI for expenditure ahead of Project Allenby/Connaught at £381 million. Project Allenby/Connaught however, which provides fully serviced, purpose-built living and working accommodation for soldiers, has the furthest foreseeable contract end date with payments expected to continue until 2040/41.

This does not represent the PFI with the longest period of contract operation. This goes to the 39-year long contract set up for the design, construction and delivery of training services at the Medium Support Helicopter Aircrew Training Facility at RAF Benson.

11. Estimates of Identified Defence Export Orders

In 2022 the UK won defence orders worth £11.2 billion. This is an increase of £4.6 billion^r compared to 2021.

The increase in the value of UK defence exports in 2022 ends a previous downward expenditure trend observed since 2018, and principally comes from new contracts with the Middle East and Europe.

Figure 14: UK Export Orders by Sector 2000 to 2022 ^{[footnote 1] [footnote 2]}

Source: UK Defence and Security Export Statistics

Time series showing UK defence export orders in current prices. This shows the volatile and almost cyclical nature of the defence export market over the past two decades. Export orders are presented as stacked bars to highlight the breakdown by sector. Where either exports cannot be placed in a single sector or the information is not available they have been labelled as ‘Mixed or Unknown’.

Air, Land and Sea all observed increased year-on-year defence export orders in 2022, but Air clearly remains the dominant UK sector with 64% of all orders by value. This is substantially greater than the 46% share seen for this sector in 2021. The £4.1 billion increase for Air was in part due to exports of helicopters to Canada.

Figure 15: UK Defence Export Orders to Regions 2020 to 2022 ^{[footnote 3] [footnote 4]}

Source: UK Defence and Security Export Statistics 2022

Horizontal bar chart showing the split of UK defence export orders by destination for the past three years. The UK’s largest market for defence exports in 2022 was the Middle East. The percentage of UK exports to the region has increased from 13% in 2020 to 34% in 2022 due to the placement of new contracts.

Despite the £3 billion value of defence exports destined for Europe being the same as in 2020, the share of exports to the region has fallen by 14 percentage points to 27% over the period. This highlights the shift of destination region in recent years, with orders to the top region of the Middle East totalling £3.8 billion in 2022. Note however that figures for Europe in 2022 do not in most cases include exports to Ukraine as these have been supplied as separate military assistance packages in relation to Ukraine’s ongoing conflict with Russia.

More information on identified export orders can be found in the DBT UK Defence and Security Export Statistics for 2022. It should be noted that export orders can be cancelled or changed at any time after the initial order has been placed.

12. Methodology

This short section on methodology sets out the processes and methods used to make some of the tables and charts in this bulletin. More detailed explanations of the data sources and methodologies used can be found in the related Open Data Source tables and Background Quality Report.

12.1 Holding Companies

Structures for holding companies have been compiled from supplier expenditure data taken from the DBS Finance contract expenditure database. The suppliers are then mapped to holding company structures based on established MOD company hierarchies plus Dun and Bradstreet supplier information. The structures are stored on an internal database and updated annually for all new companies appearing on the DBS Finance database.

Where a company is part of an identified Joint Venture, expenditure is attributed to the company based on their percentage share of ownership. For example, if Airbus owns 37.5% of MBDA, then 37.5% of MOD spend with MBDA is assigned to the Airbus expenditure total. Trading Fund (UKHO) and On-Vote Defence Agency (Dstl) data is included in the process. Expenditure with consortia, such as the Modus Services Ltd Private Finance Initiative to redevelop Main Building in London, is not distributed amongst the members of the consortia.

12.2 New Contracts

The new contracts dataset includes details of all HQ contracts, which are formal contracts set up by MOD Core Department, where payment is made through DBS Finance. These contracts were previously set up by Commercial Officers with a DEFFORM 57 submission. With the implementation of MOD’s CP&F end-to-end procurement system the contracts are input directly by Commercial Officers on to the system. Contracts have been included in the relevant financial year based on the start date of the contract entered on to CP&F.

Contracts set up for MOD using the Crown Commercial Service (CCS) are included in the analysis. The Crown Commercial Service manages the procurement of common goods and services, so that public sector organisations with similar needs achieve value by buying as a single customer.

The competitive indicator is taken from the contract statistics form entered on to CP&F. Since the introduction of CP&F in 2016/17 there have been ongoing issues with the visibility of data within the contract statistics forms attached to new contracts, hence increases to both the number and value of contracts where the competition marker is not known. The Analysis Directorate is working with the appropriate teams to resolve the issue and to ensure a wider coverage of these key data fields going forward.

13. Glossary

Contracting Purchasing and Finance (CP&F) provides a single online end-to-end procurement system for all MOD procurement activity. All other processes, especially paper-based systems, will be either replaced or subsumed.

Core Department refers to entities within MOD Departmental Boundary but excluding the Trading Fund UKHO and the On-Vote Defence Agency Dstl.

Crown Commercial Service (CCS) manages the procurement of common goods and services so that public sector organisations achieve value by buying as a single customer.

Current Prices show expenditure without removing the effects of inflation.

DBS Finance provides expert information, advice and services to and on behalf of MOD business areas, including processing four million invoices, totalling more than £23 billion a year. See also Defence Business Services.

Defence Business Services (DBS) was established on 4 July 2011 to transform the delivery of corporate services to the Department. The services delivered initially included: Civilian HR, Finance, Information Systems and some Information Services. On 1 April 2014 DBS merged with the Services Personnel and Veterans Agency and now has responsibility for managing HR processes for Military personnel including pay and pensions. Also see DBS Finance.

Defence Equipment Plan is the MOD’s annual report to Parliament on progress in equipment procurement. It provides a summary of each project’s current status and progress to date. It provides comparisons on current forecast costs and in-service dates. It is reviewed by the National Audit Office (NAO) to ensure transparency and assurance.

Defence Equipment and Support (DE&S) is a bespoke trading entity, and arm’s length body of the Ministry of Defence. By working closely with industry, partnering agreements and private finance initiatives, DE&S manage a vast range of complex projects to buy and support equipment and services to the armed forces.

Defence Science and Technology Laboratory (Dstl) was a former Trading Fund of MOD created in July 2001. It supplies impartial scientific and technical research and advice to MOD and other government departments. In April 2017 it ceased to be a Trading Fund and became an On-Vote Defence Agency of MOD.

Defence Support Group (DSG) was a former Trading Fund of the MOD created following the merger of the Army Base Repair Organisation (ABRO) and the Defence Aviation Repair Agency (DARA) on 1 April 2008. On 1 April 2015 the land repair and maintenance business was sold to Babcock. The remaining part of the business, the Air division and Electronics and Components division, stayed under MOD ownership as the Defence Electronics and Components Agency (DECA).

DEFFORM 57 completion of this form was mandatory for all contracts where the Defence Business Services (DBS) was the payment authority. It was used to set up a contract with DBS for payment purposes and was an important source of capturing data on contract activity within the Ministry of Defence. The form has now been subsumed into CP&F as data is input directly to the system by Commercial Officers.

Department for Business and Trade UK Defence and Security Exports (DBT UKDSE) helps the UK defence and security industries to export by building strong relationships with industry and overseas governments. Prior to February 2023 it was known as the Department for International Trade UK Defence and Security Exports (DIT UKDSE).

Electronic Purchasing Card (ePC) was introduced in 1997 as a convenient and cost-effective way to make low-value purchases. The card was made available to all public-sector organisations, including central government departments, local authorities and NHS organisations. When it was first introduced the card was called the Government Procurement Card (GPC) but has since been renamed.

Foreign Military Sales (FMS) are a mechanism used to purchase equipment from the US Government and is generally used due to either US security constraints or cost savings due to economies of scale. For example, where it would be more cost effective for the UK’s MOD to procure through FMS rather than directly with the supplier.

Holding Company refers to companies which are the full or part owners of other companies.

HQ Contracts are formal contracts set up by MOD Core Department which were previously set up by a DEFFORM 57. Details of HQ contracts are now recorded within CP&F with the data being input directly by Commercial Officers.

Ministry of Defence (MOD) is the United Kingdom government department responsible for implementation of government defence policy.

Miscellaneous Contracts are payment methods employed by DBS Finance (MOD’s primary bill paying authority) for running service items such as the provision of utilities. These items are covered by “miscellaneous” transactions, where no ‘MOD HQ Contract’ exists. These agreements for goods or services will have been set up locally between MOD Branch and the supplier and are legally binding.

National Audit Office (NAO) scrutinises public spending on behalf of Parliament. It is independent of government and audits the accounts of all government departments and agencies as well as a wide range of other public bodies. It reports to Parliament on the economy, efficiency and effectiveness with which government bodies have used public money.

NATO Eurofighter and Tornado Management Agency (NETMA) is the prime contractor for the Eurofighter Weapon System. The arrangements for the management of the Eurofighter programme were set out in the NATO Charter dated 18 December 1995, in which the international management agencies of the Tornado and Eurofighter programmes were integrated into a single agency, NETMA. This NATO agency is essentially a multi-nation HQ project office for these two collaborative projects, involving the UK, Germany, Italy and Spain. The RAF fleet of Tornado aircraft were retired from service in early 2019, and in the UK the Eurofighter is now called ‘Typhoon’.

OCCAR (Organisation Conjointe de Coopération en matière d’Armement) – the Organisation for Joint Armaments Co-operation was originally set up in November 1996 by France, Italy, Germany and the UK with the aim of improving the efficiency and lowering the cost of managing co-operative defence equipment programmes involving European nations (for example A400M). Belgium and Spain are now also members.

Office for National Statistics (ONS) is responsible for the production of a wide range of independent economic and social statistics. The statistics are there to improve understanding of the United Kingdom’s economy and society, and for planning the proper allocation of resources, policy-making and decision-making. It is the executive office of the UK Statistics Authority, a non-ministerial department which reports directly to Parliament. ONS is the UK government’s single largest statistical producer.

Organisation for Economic Co-operation and Development (OECD) is an international organisation that works to establish evidence-based international standards and to find solutions to a range of social, economic and environmental challenges.

Private Finance Initiative (PFI) is a system for providing capital assets for the provision of public services. Typically, the private sector designs, builds and maintains infrastructure and other capital assets (such as buildings, vehicles, equipment and water systems) and then operates those assets to sell services to the public sector. In most cases, the capital assets are accounted for on the balance sheet of the private sector operator.

QinetiQ was formerly part of the Defence Evaluation and Research Agency (DERA). QinetiQ became a limited company in July 2001. UK government holds a Special Share, through the Secretary of State for Defence, which confers certain rights to protect UK defence and security interests.

Single Source Regulation Office (SSRO) was set up in 2014 and regulates the procurement by the UK government of ‘single source’ (i.e. non-competitive) military goods, works and services. It is the independent statutory regulator of single source defence procurement, issuing statutory guidance, assessing compliance and determining how the regime applies to individual contracts.

Small and Medium-sized Enterprises (SMEs) are recognised as organisations that have a turnover of less than €50 million and fewer than 250 employees. This definition is taken from the Organisation for Economic Co-operation and Development’s glossary of statistical terms and is consistent with the definition used across government, including that of the Cabinet Office.

Smart Acquisition is a long-term MOD initiative to improve the way defence capability is acquired. MOD no longer replaces military equipment, services, estates or business information systems on a like-for-like basis but instead takes into account how such a capability will integrate with other capabilities to achieve optimum effect by its armed forces. A through-life approach to acquisition is adopted, rather than concentrating resources on the initial procurement.

Trading Funds were introduced by the UK government under the Trading Funds Act 1973 as a “means of financing trading operations of a government department which, hitherto, have been carried out on Vote”. They are self-accounting units that have greater freedom than other government departments in managing their own financial and management activities. They are free to negotiate their own terms and conditions with their staff. For this reason, their grading structures do not always match that of the rest of the Ministry. From 2017/18, the UK Hydrographic Office operates as MOD’s only Trading Fund.

UK Hydrographic Office (UKHO) was formed as a Trading Fund of the MOD in 1996 and is responsible for the provision of global hydrographic products and services to UK Defence and commercial mariners. In addition, UKHO discharges the UK’s obligation to provide hydrographic products and services needed for safe navigation in UK waters.

UK Statistics Authority (UKSA) is an independent body directly accountable to Parliament. It was established on 1 April 2008 and the Authority’s overall objective is to promote and safeguard the quality of Official Statistics that serve the public good. It is also required to safeguard the comprehensiveness of Official Statistics and to ensure good practice in relation to Official Statistics. The UK Statistics Authority has three main functions: oversight of the Office for National Statistics (ONS) (its executive office), monitoring and reporting on all UK Official Statistics, and independent assessment of Official Statistics.

14. Further Information

14.1 Symbols

Figures marked with ^p are provided as provisional estimates.

Figures marked with ^r are revised from the previous edition.

Data visualisations marked with “//” indicate there is a break in the data series. Surrounding commentary will declare the impact on the figures and whether the break in series arises from a data issue, or a change in methodology or process.

14.2 Rounding

Where rounding has been used, totals and sub-totals have been rounded separately and so may not equal the sums of their rounded parts.

14.3 Revisions

Corrections to the published statistics will be made if errors are found, or if figures change as a result of improvements to methodology or changes to definitions. When making corrections, we will follow the Ministry of Defence Statistics Revisions and Corrections Policy. All corrected figures will be identified by the symbol ^r, and an explanation will be given stating the reason and size of the revision. Corrections which would have a significant impact on the utility of the statistics will be corrected as soon as possible, by reissuing the publication. Minor errors will also be corrected, but for convenience these corrections may be timed to coincide with the next annual release of the publication.

14.4 Contact Us

The Analysis Directorate welcomes feedback on our statistical products. If you have any comments or questions about this publication, or about our statistics in general, you can contact us as follows:

Analysis Directorate (Analysis-Expenditure) Telephone: 030 015 86554 Email: Analysis-Expenditure-PQ-FOI@mod.gov.uk

If you require information which is not available within this or other available publications, you may wish to submit a Request for Information to the Ministry of Defence under the Freedom of Information Act 2000.

If you wish to correspond by mail, our postal address is:

Analysis Directorate (Analysis-Expenditure)
Ministry of Defence
Oak 0 West, #6028
MOD Abbey Wood North
Bristol
BS34 8QW

For general MOD enquiries, please call: 020 7218 9000

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1. From 2019 there was a change in the methodology used to count the number of exports. Prior to this date, collaborative exports were not counted (for example, Typhoon aircraft exports to partner nations such as Germany, Italy and Spain). This break in the data is marked in Figure 14 above by the symbol “//”. UKDSE estimates that in 2019 this accounted for an additional £600 million in UK defence exports. ↩

2. A revision of UK defence export figures follows corrections made during production of the Department for Business and Trade’s ‘UK defence export statistics 2022’ publication. It was found that some incorrect values had been used in previous releases due to the way that data relating to Australian and Canadian defence contracts had been collected and interpreted. Revisions have been made to all years from 2013 to 2021 inclusive, and has resulted in a 2.3% net reduction in the total value of defence orders over the period from 2013 to 2022. Figures prior to 2013 have not been revised to correct this issue and so represents a break in series. ↩

3. In the underlying source data from the Department for Business and Trade UK Defence and Security Exports, Egypt is included in the Middle East rather than Africa. ↩

4. Percentages below 3% have not been labelled to improve overall chart legibility. The full data can be found in the DBT UK Defence and Security Export Statistics for 2022. ↩