Special Treatment: UK Government Support for the Arms Industry and Trade

The arms industry and market, in the UK as in most other significant western arms-producing countries, has a unique status. Although its production capabilities are privately owned, it has the national government as its primary customer. Unlike other industries, especially in the ‘Anglo-Saxon’ economies, it is the subject of active government industrial policy.

The question of subsidies to arms exports must therefore be seen in the context of this huge overall level of government support, protection, and direct and indirect subsidy that the arms industry as a whole receives in the UK and elsewhere; support that is far out of proportion to its economic significance.

This study begins by providing an overall quantitative picture of the UK arms industry, followed by a brief overview of previous studies that have looked at subsidies to arms exports. It assesses and estimates the level of direct support to arms exports, that is, the identifiable subsidies that relate specifically to exports, while also discussing the place of exports in the broader government support to the arms industry and, in particular, funding for military research and development (R&D), as well as the extent to which this can be considered to include a direct or indirect subsidy to arms exports. Conversely, the report also considers the question of whether arms exports may save the UK government money through lower unit costs for its own procurement.