The defence sector in British regional development

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The Defence Sector in British Regional Development

C. M. LAW,*

Salford,

U.K.

Abstract: The aim of the paper is to provide an outline of the influence of defence expenditure on British regional development during the last one hundred years. This topic has not received much attention since defence expenditure on the armed forces is usually considered non-basic, whilst expenditure on equipment is concealed amongst many industries. There are also important spin-off effects from this expenditure. The paper shows that defence expenditure favours southern and eastern regions of Britain and thus reinforces spatial trends from other sectors of the British economy. In addition to these regional effects there are significant impacts on local economies.

gross domestic product and 11% of government expenditure (1981 Defence Estimates).

Introduction

The influence of major industries on regional economic development is well known. In the 19th century the textile industries of Lancashire and the Yorkshire West Riding provide classic examples, whilst in the 20th century the motor industry has had a significant impact on the growth of the West Midland economy. Other major industries, such as coal mining and iron and steel, have also provided a great stimulus to regional economic development, but in these examples the effect has not been confined to one region. It is fairly easy to examine the influence of an industry by using employment statistics which are classified by product groups. However, in other cases of major impact it is not so easy as the employment effect may not be limited to one product group, or confined to one region. The defence sector provides an example of such an industry. Its importance arises from its huge expenditure, money collected from the entire population, but allocated unevenly across the regions (SHORT, 1981). In 1981/2 the British defence budget was programmed for &l2,274m, equal to 5.2% of the gross domestic product and 11% of the *Department of Geography, ford M5 4WT. U.K.

University

of Salford.

Sal-

The defence sector has, for various reasons, received much comment in national and international discussions. There has been speculation in western countries about the links between defence expenditure, government ideology, military leadership and the private manufacture of arms, with talk of a military industrial complex. Laissez faire governments are usually restrained in their intervention in industry but it is suggested that the needs of national defence allow them to ignore their ideological commitment. Or, as TREBILCOCK (1976) has put it, “defence spending could operate as a general stimulus to the economy in countries ideologically resistant to other forms of public expenditure”. However, in spite of this general debate it is only recently that geographers and others have begun to explore the influence of defence on regional development (ERIKSON, 1974 and 1977; TIEBOUT, 1966; TODD, 1980). In the United States the economic shift to the south and west was pioneered by the defence sector (BOLTON, 1966), whilst in France the shift of defence establishments southwards has also had a significant regional impact. By contrast in Britain the subject has only just begun to receive attention (SHORT, 1981; TODD, 1981).

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The neglect of this topic by regional scientists may be explained on at least two grounds. Firstly, direct employment in defence appears in the service sector (SIC 901) commonly categorised as non-basic, that is it is supposed to be an activity that brings no income into the local economy from outside, but instead depends on the income generated by the basic sector. However, this is hardly valid for defence. Whilst every community may have shops, schools and police units, it is not so obvious that every community has a military base. The location of the latter is far more likely to be determined by strategic factors than the needs of a local community. Thus the direct employment in defence should be viewed as part of the basic sector and therefore much more likely to have an influence on regional development. Secondly, as suggested above, defence expediture on equipment is spread across many manufacturing industries and in addition the armed forces purchase many ‘civilian’ goods. Thus the effects of defence expenditure cannot always be identified easily, and therefore its significance is missed. However, PlTE (1980) has suggested that up to 713,000 jobs in manufacturing industry may be due to defence expenditure (including exports) or about 10% of the manufacture sector. This would rank it with other major industries in the economy like motor vehicles and, therefore, surely makes it worthy of attention. The defence function is one of the oldest activities of government. Its size and influence has varied over time, depending on strategic, economic and ideological considerations. Over time the type of defence provided has changed, and these changes will have played a role in the process of regional development. In an earlier study (LAW, 1980), the author became aware of the influence of defence on regional development, but there was insufficient space to explore the topic in detail. In this paper the aim is to provide a sketch of this influence. As such it takes a broad sweep and is inevitably discursive. The period considered is approximately one hundred years, beginning at a time when defence was being rapidly changed by new technologies. The paper is divided into three parts with the first two being based on the two main items of expenditure, personnel and equipment. A final section is concerned with the ‘spin-off effects’. The Location of the Defence Forces and Establishments

Traditionally,

labour costs have been the major

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item of defence expenditure, but the development of advanced weaponry has meant that in the late 1970~ this position was taken over by expediture on equipment. In the 1981 Defence Estimates, personnel costs came to 40% of the total budget, broken down between forces pay (21%), civilian pay (14%), and pensions (5%). The numbers employed in defence have obviously varied over time according to the perceived needs of the country. During both World Wars there were over 4 million in the forces, but in peace time this figure (excluding civilians employed in defence) has rarely been over three quarters of a million, of whom some have been employed overseas. Since the last war there has been a slow run down of defence employment, which is likely to continue, and which in part is a reflection of the greater dependence on advanced weaponry. This run down of staff has been accompanied by a reduction of defence establishments, particularly of airfields and army barracks. In 198OBl the Ministry of Defence employed approximately 465,000 people in the United Kingdom with additional numbers employed overseas. Of this U.K. total, 54,000 were working in Royal Ordnance Factories and Royal Naval Dockyards, which for statistical purposes are classified as manufacturing industry and are thus more appropriately considered in the next section. Table 1 shows the regional distribution of defence employment revealing a differential impact across the country. The four regions of the South East, South West, East Anglia and Northern Ireland have a greater share of posts than could be expected from their proportion of the population. In contrast, the regions of the North West, West Midlands and North have a much lower share than could be expected. The final coiumn in Table 1 shows the consequences for region employment of this uneven distribution which has resulted in the South East and the South West having many more jobs and the North West in particular having many less. The regional distribution of armed forces and civilian staff is not exactly similar. This reflects the fact that the former are found mainly at bases located for strategic reasons, whilst the civilian staff are more likely to work, administrative be engaged in routine including storage, which is less likely to be located according to strategic factors. These employment patterns are reflected very closely in the distribution of income from defence employment (SHORT, 1981).

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Table 1. The regional distribution of the armed forces and associated civilian employment in the United Kingdom 1980/l

Regional South East East Anglia South West West Midlands East Midlands Yorkshire and Humberside North West North Wales Scotland Northern Ireland Total

Armed Forces (~)

Civilian Staff (000)

94.8 13.8 50.0 9.7 13.9

Regional Population %

Excess/ Deficit* (~)

Total (~)

%

77.3 2.7 36.2 10.8 7.3

171.1 16.5 86.2 20.5 21.2

41.9 4.0 21.0 5.0 5.1

30.1 3.4 7.8 9.2 6.8

+48.6 +2.5 +54.5 -17.4 -6.8

14.6 2.0 1.2 6.9 18.1

7.3 3.4 4.2 7.5 13.3

21.9 5.4 5.4 14.4 31.4

5.3 1.3

8.7 11.5 5.6 5.0 9.2

-14.0 -42.0 -17.7 -6.2 -6.5

11.9 238.1

3.1 173.2

15.0 411.3

3.6 100.0

2.8 100.0

+3.5

*Excess or Deficit in employment over expected numbers if each region had the same share of employment as its share of the total population. Source: 1981 Defence Estimates and 1981 Census Preliminary Report. Figures for post-1974 Standard Regions. Figures exclude employment in Royal Ordnance Factories and Royal Naval Dockyards.

There is insufficient space to examine the historical evolution of this pattern in detail, but figures from the 1931 Census reveal that in that year 61% of employment was in the South East, followed by the South West with 17%. As a result of the Second World War there developed a wider spread of defence establishments, prompted by strategic factors and the need for dispersal. Since 1969 there has been an increase in the armed forces in Northern Ireland as a consequence of the troubles. Further understanding of this geography of defence employment can be gained by considering separately the three armed forces (Table 2). The regional distribution of employment in the Royal Navy shows the greatest degree of concentration, dominated by the South East (48%), South West (38%) and Scotland (13%). The main features of this pattern date back at least four centuries when England’s main enemies were France, Spain and the Low Countries. It was therefore necessary to develop naval bases in the English Channel at Portsmouth, in the south west at Plymouth and in the Thames estuary, where Chatham emerged as the principal establishment. It was only at the beginning of the 20th century with the rise of

German sea power that a base in the northern North Sea was considered necessary, and Rosyth was established. Since the early 1960s the Polaris nuclear submarine base has been developed on the lower Clyde. The Army shows a similar regional pattern with 45% of personnel in the South East, 16% in the South West, 11% in Northern Ireland and 9% in Yorkshire and Humberside. In the past, barracks were established in most county towns, with larger units in centres like Edinburgh, Chester, York and particutarly in London (including garrisons in Hounslow and Woolwich). Protection from the continent was afforded by army establishments in the Hythe (Kent) area. From the middle of the 19th century the army began to develop large training areas, usuatly choosing areas of low agricuItura1 value. The first of these was at Aldershot, started in 1853, and in the early 20th century camps were established on Salisbury Plain and at Catterick (North Yorkshire). Other training camps have been established at places like Lulworth and Dartmoor, with a predominence of such camps in southern England. During the Second World War and the post-war period of National Service there was a

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GeoforumiVolume Table 2. Regional distribution

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of the armed forces in the U.K. July 1980

Region

Royal Navy and Marines (000s) %

South East East Anglia South Western West Midlands East Midlands Yorks and Humberside North Western Northern Wales Scotland Northern Ireland United Kingdon

31.7 0.1 25.1 0.1 0.1 0.1 0.1 0.1 0.1 8.4 0.1 65.6

48.3 0.1 38.2 0.1 0.1 0.2 0.2 0.1 0.1 12.7 0.1 100.0

Army (000s) % ---.~~ 45.5 47.2 2.3 2.3 15.7 16.2 5.8 6.0 1.2 1.2 9.0 9.3 1.8 1.9 0.3 0.3 0.9 0.9 2.8 2.9 10.8 11.2 96.4 100.0

Royal Air Force % (000s) -_ ._.~ 17.6 23.1 11.5 15.1 9.2 12.1 3.9 5.1 12.6 16.6 5.5 7.2 0.1 0.1 0.8 1.0 s.9 7.7 9.1 1.2 100.0

Source: Ministry of Defence (Tri-Service Manpower Returns) Notes: 1. Regions are post-1974 Standard Regions 2. The Navy figures include personnel at sea based in Home Waters. 3. Columns do not sum exactly due to rounding and to the fact that different sources are used for the U.K. and Regional and National totals.

wider spread establishments, subsequently

of camps, but many of these built only to be temporary, been closed.

newer have

The location of Royal Air Force personnel shows a more dispersed pattern, with the main feature being the importance of eastern and southern areas. Once again this reflects the strategic need to protect the country from attack from the continent. There was a large-scale expansion of military airfields during the Second World War, although subsequently most of these have been closed (BLAKE, 1981). So far the discussion has been in terms of the interregional distribution, but within regions employment is not scattered evenly but is highly localised. Quite obviously in areas Iike Plymouth, Portsmouth, the Medway towns, Aldershot and Salisbury, the Royal Navy or Army presence is impressive and makes a significant impact on the local economy, and should be regarded as a basic sector of the economy. Likewise, in many rural areas the presence of an RAF station has considerable repercussions on the local economy. Not only are there jobs in the forces and also for civilians, but the income so earned will, through multiplier effects, generate further local employment. This effect has been studied for the Moray Air Stations by GREENWOOD and SHORT (1973) and for the

Clyde Submarine Base by SHORT, STONE and GREENWOOD (1974). Although there was a significant multiplier effect, it was lower than in some other (non-defence) study areas, probably a consequence of the fact that the armed forces are not permanently resident in an area and therefore tend to spend a lower proportion of their income there, and also that some consumption is internal to the base. In spite of the considerable local employment effect, regional policy would appear to have played little role in the decisions concerning the location of defence establishments. In the case of the reopening of the Brawdy airfield in Pembrokeshire it is likely that local employment considerations were significant in the decision, but it is difficult to find many other examples, although it has been suggested that regional policy should be more important (TODD, 1980). In addition to these British armed forces there are also 25,000 American forces personnel permanently stationed in this country, with approximately 62% in East Anglia, 24% in the South East, 10% in Scotland and the rest scattered in small numbers (Guardian, 29.9.81). Once again there will be multiplier effects on the local economy.

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The geography of defence personnel thus strongly favours regions to the south and east to the detriment of regions in the north and west, with the exception of Northern Ireland where there are special factors. This pattern reflects long term strategic factors and no doubt a certain amount of inertia. These trends are somewhat ironic with the regions having the highest unemployment rates, and probably providing most recruits, receiving relatively few posts, and vice versa. Thus the defence sector makes some contribution to the continuing imbalance between ‘north and south’.

The Location of Defence Industries The traditional government approach to the supply of arms was to procure as much as possible from government owned establishments and only in times of emergency purchase equipment from the private sector. Thus factories for guns, rifles, ships and gunpowder were established and later there was even a Royal Aircraft Factory for a short time. In the middle of the 19th century there was almost a state monopoly on arms supply, but towards the end of the century there was a dramatic shift in procurement policy so that by 1900 two-thirds of defence equipment was purchased from the private sector (TREBILCOCK, 1969). The reasons for this change were firstly the rapidly changing technology of defence equipment, not all of which could be handled adequately in the state factories, and secondly the great increase in arms requirements which were beyond the capacity of the state factories. Accordingly, the state invited selected firms to participate in arms manufacture. These firms developed a special relationship with the government and were sometimes known as the ‘inner-ring’ (TREBILCOCK, 1966). Through this special relationship the government could control the quality, reliability and speed of supply of its defence equipment purchases. Among the early firms involved were Vickers, Armstrong, John Brown and Beardmore, who within a few years moved from a limited interest in defence requirements, such as the supply of armour plate, to become all purpose armament manufacturers supplying ships, guns and aircraft. This inner ring of suppliers has never been constant as further advances in technology have brought additional firms into the circle; whilst the increasing cost of weapon systems has caused mergers or defections amongst the main contractors. These firms, or at least certain of their subsidiaries or divisions, came

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to rely very heavily on the defence market, both at home and overseas. Even though exports might become important, and in some cases these were very significant for the growth of the firm, it was the initial work for, and orders from the British government that were crucial, giving them credibility in the eyes of other governments. Because of this special relationship with government, defence firms were and are in an unusual market position with much less competition from rival firms since it is in the government’s interest to maintain the inner ring of firms. Consequently the economic theories of industrial location which require firms in a competitive situation to seek least cost sites would be less relevant to defence firms whilst behavioural explanations might be more useful, particularly as there was often collusion between the major defence contractors. In order to understand the location of defence industries it is appropriate to consider the major components of defence expenditure. The proportions of equipment expenditure spent on ships, guns and army equipment, aircraft and electronics has varied considerably over the last one hundred years, with a decline in the importance of naval equipment and a rise in the importance of aerospace. Today approximately one third is spent on aerospace equipment, one fifth on electronics and one tenth each on ships and land equipment. Similarly the size of the defence industry establishments has varied over the period reviewed and so in the following maps no indication of size is given.

Naval Ships Until the middle of the 19th century most warships were built and repaired in the Royal Navy Dockyards at Chatham (with Sheerness), Deptford, Pembroke Dock, Plymouth, Portsmouth and Woolwich. Only exceptionally, when there was a short term lack of capacity in these yards, did the Navy turn to private constructors and then these were principally on the Thames (POLLARD, 1950). From the mid 19th century shipbuilding was revolutionised by the development of iron (and later steel) steam powered ships. The new skills required were not always immediately available in the Royal Naval Dockyards, resulting in more orders to private yards particularly on the Thames. However, the Navy did modernise the yards, closing the Deptford and Woolwich yards in 1869 and in the early 20th century building a yard at Rosyth to service the

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Figure 1. Naval construction

fleet in the northern North Sea (Figure 1). It also developed a torpedo works on the Clyde and a cordite factory near Poole. With the increasing tension between Britain and Germany, a large warship building programme was initiated in 1889, which was to continue, with only short breaks, up to the First World War. For the first time it was no longer possible to consider the Royal Naval Dockyards as capable of suplying even the major part of the work required and private firms were invited to consider specialising in warship construction. This change occurred at a time when shipbuilding was shifting northwards and deserting areas like the Thames where land and labour costs were high and where the firms were distant from iron and steel supplies (POLLARD and ROBERTSON, 1929). Two naval boat builders, Thorneycroft and Yarrow, left London for

yards,

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1913.

Southampton and Glasgow respectively, whilst the last Thames warship building yard closed in 1912. The new pattern involved a small number of yards on the Clyde, Tyne, Mersey and at Barrow in Furness where naval construction was a major part of the output (Figure 1). Considerable vertical integration took place with the steel firms which supplied armour plate acquiring or building naval yards in these areas; in the same way the Newcastle gunmaker Armstrongs also became involved in warship manufacture. Thus at the end of the 19th century and the beginning of the 20th century there was a dramatic shift of naval shipbuilding from southern to northern Britain. By 1913 there were about 75,000 jobs in the northern naval yards compared to only 34,000 in the south. Since naval shipbuilding is a highly specialised task those new jobs were more highly skilled (and probably more highly paid) than jobs in the other shipbuilding

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yards in these areas (TODD, 1981). In addition there would have been many other jobs created locally through sub-contracting. Consequently some shipbuilding centres in northern Britain were highly dependent on the defence sector for employment. During the First World War many other shipbuilding firms became involved in the production of warships to meet the obvious national needs, but after the war only one of these, Harland and Wolff of Belfast, remained as a naval constructor (TODD, 1981). At the end of the war the 1920 Washington Navai Treaty and the 1930 London Naval Treaty limited the number of warships that could be built for 15 years and resulted in a great scarcity of orders for the specialist yards. The Royal Naval Dockyard at Pembroke Dock was closed, Vickers and Armstrongs were forced to merge, the yards of Palmers at Jarrow and Beardmore at Dalmuir were closed permanently and other yards were run at a reduced level and even temporarily closed. However, the Royal Naval Dockyards in southern England were kept going on repair work, which was to become their main function. Thus, long before the depression beginning in 1929, the areas of northern Britain dependent on naval ship-building were hit by a lack of orders resulting in unemployment, whilst southern England survived relatively unscathed. In the post-Second World War period only a handful of yards (at Barrow, Birkenhead, Glasgow, Newcastle, Belfast and Southampton) have relied heavily on naval orders, either from home or abroad. However, in the late 1970s it was hoped that the rundown of merchant shipbuilding orders could be partly compensated for by a switch to defence work. This hope was shattered by the 1981 Defence Review, which if implemented is likely to reduce even further the number of specialist naval shipbuilding yards. At the same time it was announced that the Chatham dockyard is to be closed by 1984 and in the same time period the Portsmouth dockyard is to be considerably reduced. However, although these decisions have been confirmed in the 1982 Defence Estimates, the recent Falklands crisis may result in a review of these proposals, and already it has been announced that the rundown of the Portsmouth dockyard has been postponed. Guns and Ammunition

The early history of gun and ammunition manufacture reveals a similar involvement by the govern-

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ment. The Royal Arsenal at Woolwich was developed from 1695 to manufacture gunpowder (briefly) and guns. Royal Gunpowder Factories were developed at Faversham and Waltham Abbey in the 18th century with a concentration at the latter from 1825. A rifle factory at Enfield, later the Royal Small Arms Factory, was acquired in 1811 and work transferred there from the Tower of London. Later in the mid 1850s this factory was modernised to mass produce rifles using American methods. Thus by this date the government was able to produce most of its requirements of guns and ammunition from its own three large factories in the London area. However, this was not the end of private manufacture. Earlier in the century many rifles had been supplied from the Birmingham area and interests here fought back through the Birmingham Small Arms (B.S.A.) Company which built a factory in 1861. In Newcastle W.G. Armstrong developed a heavy gun, which received goverment approval, and a factory was built in 1859. However, in both cases government orders were sporadic and the firms would not have survived but for exports. Towards the end of the century, Nordenfeit and Maxim developed new light guns and built factories in north west Kent, which were later acquired by Vickers. Guns were also made by Vickers in Sheffield and Whitworth in Manchester and in 1905 the Coventry Ordnance Works was established by a consortium of steel interests. Once again the rearmament programme aided the emergence of a private industry. Meanwhile the approval of cordite in 1893 resulted in several new firms entering, and older firms expanding their interests in, military explosives, the most notable of these being the Nobel Explosives Company at Ardeer in Scotland. As with naval shipbuilding, this expansion of capacity for the manufacture of guns and ammunition reached a climax in the First World War. The government itself built many factories, but these were quickly abandoned at the end of the war. Once again government capacity was confined to the three London factories. In the private sector there was much rationalisation and reduction of capacity at the end of the war. Where firms kept manufacturing facilities, as did Vickers-Armstrongs, B.S.A. and Nobel (later I.C.I.), they could not have survived the inter-war period on the limited orders available, and depended instead on a programme of diversification, as with B.S.A. into bicycles, motorcycles and cars.

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At the beginning of the rearmament programme before the Second World War it was decided to plan for a large-scale expansion of Royal Ordnance Factories. The new factories were to be widely scattered across the country, but to be located particularly in the western half of the country which was considered ‘safe’ (HORNBY, 1958; KOHAN, 1952). The final pattern of ROFs is shown in Figure 2 (MOYES, 1975). At the end of the war about half of the factories were closed immediately and the subsequent closure of several others, including the Royal Arsenal at Woolwich, has left only 11 still manufacturing today, the locations of which are also shown in Figure 2. The present government is now considering whether some or all of these should be sold to private enterprise. The net effect of these changes has been a shift away from the London area, with 42% of employment now in the North West, 12% in Scotland and 9% in Wales.

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Aircraft

At the beginning of the 20th century a few enthusiasts began to experiment with and develop flying machines. Very quickly the military significance of such machines was seen. The development of aircraft and of the aircraft industry owes a great deal to the possible military application, so much so that the sales of the industry have always been dominated by defence. It is impossible to understand the growth and location of the aircraft industry without recognising this link. The industry expanded rapidly during the First World War. At first, until 1915, most military aircraft were made at the Royal Aircraft Factory at Farnborough (near Aldershot). Thereafter many private firms were involved in construction. However, it was natural that the London area should become the principal manufacturing district. London was the headquarters of British

,+&A_-,

Figure 2. Royal ordnance

l

WWU & 1981

factories.

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defence where decisions about purchase were made. It was at nearby Farnborough where many designers and engineers received their early training; the factory there developed into the Royal Aircraft Establishment which provided crucial technical advice to the industry. Such technical advice was also provided by staff of the National Physical Laboratory at Teddington, which is also near London. There is not space to discuss the origin and location of these early aircraft manufacturing firms (see BLOOMFIELD, 1963). After the war, military orders fell drastically, and as with naval shipbuilding, there was a lean period of 15 years. During this period, particularly in the 1920s many firms left the industry and there remained 15 ‘approved’ aircraft constructors. In 1935, just before rearmament got under way, these firms employed 18,600 people, 60% of whom were in the South East and a further 16% in the South West. Plants at Coventry, Brough (Yorkshire) and Manchester each accounted for only between 6-7% of total employment. In addition there were four approved aero engine

177 manufacturers at Derby (Rolls Royce), Coventry (Armstrong Siddeley), Bristol (Bristol Engines) and London (Napier) (Figure 3). Outside these 19 firms, the aircraft industry consisted mainly of component manufacturers located near the main centres of the industry. From 1935, under the rearmament programme, the industry expanded greatly. A large number of shadow factories were built usually duplicating manufacturing facilities of the parent works and once again the aim was to locate them chiefly in the western or safe half of the country. The English Electric Company re-entered the industry developing factories in the Preston area, whilst a few nonapproved light aircraft manufacturing firms, mainly found in the South East, also expanded (Figure 4). After the war some of these factories were closed immediately, but many continued until a further round of closures occurred in the 1960s. A comparison of Figures 3 and 4 reveals that there has been a permanent shift of the industry northwards and westwards. The South East now has less than 24% of the military industry, although it should be noted

.\

Figure 3. Aircraft and aero-engine

factories, 1930.

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WWLZ

WWlF&1981 . 1981

l

i Figure 4. Aircraft and aero-engine

that some of the most advanced aerospace missiles are built in relatively new factories in Hertfordshire. The other main centres of the industry are in the South West, North West and East Midlands, and there are smaller concentrations in Yorkshire, Scotland and Northern Ireland.

Communication

.J

factories, W.W.11 and after.

the result of collaborative research by the firms and government. The majority of factories making this equipment are found in the South East and belong to firms like G.E.C. Marconi, Plessey, Ferranti, Thorn-E.M.I. and Racal (Figure 5). The few factories located elsewhere are either the result of war time moves, as with Ferranti at Edinburgh, or later regional policy.

Systems and Electronics

The development of radio at the beginning of the century was, like aircraft, seen as an invention with military applications. Its first major use therefore was as a means of communization between land establishments and naval ships, and it was not until after the First World War that radio for the public was developed. Early radio manufacturers, such as Marconi, located their factories so as to be near London and in close contact with the Admiralty. Subsequentiy, the radio industry evolved into the electronics industry, which likewise has been predominantly located in the South East. Many of the products of the electronics industry have initially been developed for the armed forces and have been

Defence Industries:

Some Conclusions

It has only been possible in this section on defence industries to consider the main military products and the chief contractors. There are of course a wide variety of products and numerous subcontractors, some of whom make very specalist components. In their turn, both main and subcontractors purchase general materials and components from other industries and in this way, the effects of defence spending spread throughout the economy both sectorally and geographically. PITE (1980) has attempted to calculate the employ-

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r

Figure 5. Defence

ment effects of defence spending in 1978. In that year he calculates that 219,000 jobs were created directly through the placing of main defence contracts, 100,000 jobs were generated by the armed forces purchase of general materials such as food and clothes and a further 69,000 jobs existed because of the export of defence products by the main contractors. To this total of 388,000 directly created jobs must be added a further 325,000 generated indirectly through the purchase of basic materials and general components. This final total of 713,000 jobs represents approximately 10% of manufacturing employment in that year. It would be very difficult to discover the geographical distribution of all these employment opportunities, although no doubt input-output analysis would enable an estimate to be made (as used by TIEBOUT (1966) for California). SHORT

electronic

factories,

1981.

(1981) has examined the regional pattern of prime contracts and shown that the South East, South West and the East Midlands receive a larger share than could be expected from their population proportion whilst the West Midlands, Wales, Northern Ireland and Yorkshire receive much less. One interesting conclusion that can be derived from this survey of defence industries concerns the filtering down of job opportunities from the South East to the more peripheral regions. It would appear that just as in the product life cycle theory, defence products are pioneered in the South East and, later in their product life, are passed to factories in the more peripheral regions. This can be seen with ships, Royal Ordnance Factories and Aircraft. The newest and most advanced products, related to electronics, are still manufactured in the South East. The reasons for this dispersal have been varied:

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access to cheap materials and labour, strategic and more recently regional policy. Given the importance of regional policy in the post-war period, it is perhaps surprising that more efforts have not been made to shift cdefence equipment spending to the regions. There is a Special Preference Scheme which allows firms in assisted areas to retender for contracts but according to SHORT (1981) this has not been widely used.

Spin-Off Effects The idea of the ‘spin-off’ has been popula~ised by the array of new products, originally developed for the United States moon programme, which have come into general use. Indeed these indirect benefits, variously called ‘technological fall out’, ‘civil fall out’, or ‘spillover effects’, are sometimes used as an argument, almost a justification, for the continuance of defence industries (PLOWDEN REPORT, 1965). TREBILCOCK (1969) has defined the “spin-off process as an innovation that has been pioneered in a sector largely financed by public funds and which is then transferred to a field of genera1 industry where it locates widespread secondary effects”. The possibility for this spin-off arises from the fact that during most of the last hundred years there has been a competitive arms race, which has forced the defence sector to pioneer and rely on advanced technology. In addition western defence firms have an interest in continuous technological development in order to maintain the use of their production and research facilities (KALDOR, 1982). The armed forces have estabIished their own research and development facilities and have also paid for work performed in private laboratories. In 1975, 25% of all United Kingdom funds for research and development and approximately 50% of the total government expenditure on research, came from the defence budget (Annual Abstract of Statistics, 1981). For 1981-82 the was and development budget for research programmed for &1683m, a figure which represents 13.7% of the total defence budget. The equivalent figures for 1982-83 are &1841m or 13%. Approximately one third of this will be spent in Ministry of Defence establishments and two thirds in private company and university laboratories. In order therefore to assess the geography of spin-off it is necessary to consider the growth and location of these research facilities. Research for defence purposes began in the second

half of the 19th century at the Royal Arsenal, Woolwith. In 1907 the various research sections were brought together in a Research Department (IIOGG, 1963). Work on guns was carried on there which also served the Royal Navy, but for ship research a tank was established at Portsmouth in 1885. Just before the First World War research on aircraft was started at Farnborough~ which has remained the principal centre. During the First World War many new technical units were established in the armed forces and these graduaily developed their own research sections. Up until the Second World War most of these were in the London and Portsmouth areas, but the war caused a dispersal of these facilities. By 1975 there were 32 Ministry of Defence research and development laboratories (not counting outiying test ranges) and except for an establishment at Dunfermline they were all in southern England (Figure 6). In 1979 they employed 34,500. Since 1975 there has been some rationalisation of establishments resulting in mergers and closures, but the fundamental pattern remains the same. In the private sector research today is heaviiy concentrated on the aerospace and electronics sectors. As it has already been suggested these industries have shown a preference for southern England, and so not surprisingly their research facilities are also concentrated there (Figure 7). Thus defence research facilities contribute significantly to the concentration of all R dz D establishments in southern England, with its consequences for the geography of incomes and skilled labour (LAW, 1980). In the case of defence this concentration is presumably related to the need to be near the headquarters of the Ministry of Defence in London and near the many defence establishments in this part of the country as well as to the ease in attracting skilled scientists. Within these R & D establishments new technologies, new products and new manufacturing processes are developed with considerable spin-off possibilities. Whilst there is no doubt that spin-off does take place it is frequently suggested that in Britain this civil fail out is much lower than it might he, either because the defence sector is not of sufficient scale as compared to the United States, or because the economic and social climate of the country discourages such transfer. Recently the minister responsible for industry, Patrick Jenkin, exhorted industry to exploit defence research (British Business, 14,532). It is not within the purpose of this paper to enter into this debate, but merely to discuss the spatial impact of spin-off. The transfer of

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Figure 6. Government

development

defence, research and establishments, 1981.

this technology, insofar as this is possible within the Official Secrets Act, requires the entrepreneurial function. Initially we should expect to find these spin-off effects in the major defence contractors and in their chief sub-contractors (CENTRE FOR THE STUDY OF INDUSTRIAL INNOVATION, 1961), but ex-workers from these firms and from R & D establishments may form their own companies to exploit these new technologies. Whilst these spinoff effects may be experienced in any part of the country it could be expected that the greatest effects would be felt in or close to those areas where these new technologies were initially developed and innovated. We can consider these spin-off effects in four ways. Firstly, products developed initially for defence purposes may have a civilian use, although this use may not be realised till sometime later. These products may be principal goods, components, or materials (e.g. alloy metals); radio and communications systems and radar provide obvious examples of cases where manufacturers were able to expand their production by diversifying markets from defence to

Figure 7. Research and development

establishments connected with defence industries.

civilian areas. A more recent example of this type of spin-off was described in the Sunday Times (Feb 15, 1981). A scientist working at the Chemical Defence Research Establishment at Porton Down near Salisbury developed a special fabric to be used in protective clothing needed in case of attack by gases and acids. This clearly had uses in the chemical industry and so in 1977 he was encouraged to establish a firm, the Charcoal Clothing Company, to serve both markets. Not surprisingly, the new firm established a factory a few miles away on the outskirts of Bournemouth. Secondly, products initially developed for defence purposes may be adapted for civilian use. In this case the civilian product is clearly different from the defence product but the basic technology is the same. Thus, aircraft firms which have designed vehicles for military purposes modify or redesign them for the consumer market. Likewise military radio equipment is adapted to become suitable for the consumer radio market. Given the early history of radio in this country, developed as it was for military purposes, it is not surprising that the early

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consumer radio industry area where the necessary to be found.

developed in the London skills and expertise were

Thirdly, manufacturing processes developed in connection with defence products may be transferred to the manufacture of non-defence products. TREBILCOCK (1969), for example, suggests that both Vickers and B.S.A. were, at the beginning of the century, able to gain considerable commerical advantage from such transfers. Clearly their nondefence products did not have to bear the full costs of developing suitable manufacturing processes. However, at least in the case of Vickers it is not clear that the transfer of manufacturing technology was in any way limited geographically since the company had widely scattered plants. Fourthly, technology learned in the course of defence work may be used to develop new nonmilitary products. Once again a simple historical example can be given to illustrate this process (KNOCK-OLDS, 1980). In the First World War Reginald Foster Dagnall was the manager of a balloon factory in London. In 1920 he established a company, R.F.D. Limited at Walton on Thames, to manufacture small air bags which were then fitted into the wings of fighters for safety reasons in case they were forced down into the sea. Subsequently the firm diversified into inflatable life rafts, initially for defence, later for recreational use, and has continued to grow, now being located at Godalming, Surrey. The above account is clrearly only a sketch of the possible technological spin-off effects. It would require an enormous survey to measure the qualitative and quantitative effects of the process. However, the fact that no precise figures, such as employment, can be put forward does not lessen the impact of the effect. Given the evidence put forward earlier on the location of defence establishments, defence industries (particularly those dealing with advanced technologies) and R CyrD establishments it does not seem unreasonable to suggest that the greatest spillover effects of defence spending will be in southern England. Already some examples have been given of firms which have been launched on the basis of defence spending, and many more examples in southern England could be found. However, it would be difficult to find many modern examples in northern Britain. In addition

to the four types of technological

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off which have already been discussed, it may also be postulated that the concentration of defence activities in an area may have promoted additional expenditure on infrastructure such as roads or docks. Not only would these generate short-term employment and income gains during the building stage, but they may also enhance the overall attractiveness of the area for economic development. Once again, however, it is not possible to measure such spin-offs with any precision. Finally it should be noted that not all defence spill-overs need have a positive effect on the local economy. It might also be true that the defence forces have discouraged, for security reasons, non-defence activities in these areas at certain times in the past. It is suggested that the theme of indirect spillover effects is one which might be pursued in relation to the main defence centres of the country.

Conclusion PITE (1980) has calculated that in 1978 defence expenditure created one and a quarter million jobs or about 5% of all employment. It has been shown or suggested above that these employment and income effects are far from evenly spread across the regions, and that two regions the South East and South West derive considerable advantages from the defence sector. Three other regions, East Anglia, East Midlands and Northern Ireland, also gain above average benefits, whilst all other regions receive less than their share of the population would suggest. Although the position has never been static, and there have been significant regional shifts over time, particularly just before and during the Second World War, there is reason to suggest that the South East and South West have been long term beneficiaries of the allocation of defence spending. Their advantage arises from long term strategic considerations, proximity to the continent, and also proximity to London. Whilst the 1981 Defence Review may weaken the employment position of these two regions it is hardly likely to alter their predominance in the allocation of defence spending. However, it should be noted that changes in defence policy with regard to the differing emphasis given to particular weapon systems could have significant regional repercussions. A policy favouring submarines as opposed to conventional ships would produce a different geographical outcome. However, it is not perhaps the quantitative aspects of defence expenditure which are so important to

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regional development as the qualitative ones. The economic structures of modern societies are changing all the time as a result of improving technology. Those regions within a country which are able to capture the new technology are most likely to be able to maintain relatively high incomes and high levels of employment. Those regions which do not have this up to date technology are most likely to have to depend on older less sophisticated industries, some of which have been passed down via industrial migration from the more successful regions. As we have seen, the defence sector has an important role in the development of this new technology, and since most defence related R & D establishments are in southern England, the defence sector assists this part of the country to maintain its lead over other regions. Of course the advanced industry of southern England is not solely dependent on defence expenditure, and the region has other advantages, but nevertheless defence must be seen as one of the significant factors in the success of this part of the country.

be put on the main defence contractors to build factories in the northern and western parts of the country. In particular there needs to be a long term policy for the location of defence R & D establishments, whether public or private. Over a period some of these could be moved northwards, not only providing jobs in the short term but also the possibility of significant spin-offs for regional development. The 1943 war-time move of Ferranti from Manchester to Edinburgh provides a unique example of such possible effects, with the company now employing 7700 in Scotland and having spawned several new companies as well as encouraging the migration of American electronics firms to east central Scotland. Another proposal that has been put forward is that Ministry of Defence workshops, which have much advanced equipment and are often under-used, could do contract work for civilian firms, thus providing a service to local industry and assisting industrial development in their region (SOUTH WEST ECONOMIC PLANNING COUNCIL, 1969).

For some local economies defence expenditure can be a very important source of basic income, whether derived from defence establishments or defence industries. In general this is a stable source of income not affected by economic cycles. However, sometimes it is susceptible to sudden changes of policy as when equipment programmes are cancelled or when a defence review results in the rapid closures of defence establishments. Unfortunately these local economies are often unable to make a rapid adjustment following the demise of a defence activity. Defence bases are often too specialised for other uses, whilst defence industries often find it difficult to change products and move from a market dominated by one customer to a more competitive one.

AcknowIedgements

Finally, as TODD (1980) has suggested, more attention needs to be given to the role which defence expenditure could play in regional development and policy. Whilst the location of defence bases is likely to be determined mainly by strategic considerations~ some of the more routine functions of the Ministry of Defence could be diverted to the assisted areas. Already there has been some attempt to move Ministry of Defence offices to Cardiff and Glasgow, although the original proposals were scaled down in 1979. For the defence industries, given the power of the monopoly buyer, there is no reason why more factories should not be diverted to the assisted areas. Pressure could easily

- The author acknowledges help received from the Ministry of Defence and comments from Mr. A. Moyes, Dr K, Warren, and E. J. Malecki. The usual disclaimer applies.

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BLOOMFIELD, G. (1963) The Geographical Location of the Motor Industries in the British Isles, Ph.D. Thesis, Nottingham. BOLTON, R.E. (1966) Defence Purchases and Regional Growth, Washington. CENTRE FOR THE STUDY OF INDUSTRIAL INNOVATION (1961) Aspects of Spin-Off, London. ERIKSON, R.A. (1974) The Regional Impact of Growth Firms: the Case of Boeing, Land Ec~tzoF??ic.~50. 127136. ERIKSON, R.A. (1977) Sub-regional Impact Multipliers: Income Spread Effects from a major Defence Installation, Economic Geography 53, 283-294. GREENWOOD, D. and SHORT, J. (1973) Military Installations and Local Economies: the Moray Air Stations, Aberdeen. Sr~~~es in &fence Economics, No. 4.

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(1969) Plymouth Area Study. TIEBOUT, C.M. (1966). The Regional Impact of Defence Expenditures: Its Measurement and Problems of Adjustment, In: Defence and Disarmament: The Economics of Transition 1966, R. E. Bolton (Ed.). Englewood Cliffs. TODD, D. (1980) The Defence Sector in Regional Development, Area 12, 115-121. TODD, D. (1981) Regional Variations in Naval Construction. The British Experience, 1895-1966, Regional Studies 15, 123-142. TREBILCOCK, C. (1966) A Special Relationship - Government Rearmament and the Cordite Firms, Economic History, 19, 64-65. TREBILCOCK, C. (1969) “Spin-Off” in British Economic History. Armaments and Industry, 1760-1914. Economic History Review, 474-490. TREBILCOCK, C. (1976) The British Armament Industry 1890-1914. False Legend and True Utility, In: War, Economy and the Military Mind, C. Best and A. Wheatcroft (Eds), London.