Roland Berger: Defence spending halved in 3 decades

With recent wars in Iraq and Afghanistan behind the UK, the level of defence spending is trending downward. According to a research from Roland Berger, the UK’s spending on defence relative to GDP has halved over the past three decades, from more than 5% in the 1980’s to 2.4% this year. Yet in comparison to many NATO allies the UK still spends relatively much, and continues to contribute the agreed share to NATO’s defence fund.

Defending the Island
The amount of funding the UK government has earmarked for defence has steadily trended downward with respect to GDP between 1956 and 1998, from around 7% of GDP to 2.4%, with the downward trend levelling off between 1996 and 2013. Historically the decline being arrested to some degree during periods of heightened threat.

While in relative terms to GDP, there has been a decrease, in absolute terms, the defence spending, in response to the need to fund two wars in Iraq and Afghanistan, reached a recent high of £40 billion in 2010, an increase in £30 billion from 2002. The expenditure has recently trended downward since the relative end of engagements in Iraq and Afghanistan.

Defending the mainland
While spending in terms of GDP on defence has trended down in recent history, to its today benchmarked 2.4%, contrary to many allies, the UK is paying its way in NATO. One of the commitments NATO members make is to pay 2% of their GDP to supporting the joint defence project. Of the European contributors, only the United Kingdom, Greece and Estonia currently meet their commitment. France contributes 1.9% of its GDP while Germany contributes ‘only’ 1.3% of its GDP to the programme. Recent geopolitical uncertainty has resulted in a renewed pressure to fund NATO and its capabilities, during the September 2014 Wales Summit those NATO allies which currently do not meet their commitment agreed to "move towards the 2% guideline", while those who currently do agreed to continue to do so.

World defence
While expenditure among NATO members has been trending down in recent years, the UK’s spending decreasing around £4 billion since 2010, nations such as Russia and China have increased their defence expenditure. Russia growing by 9.3% per annum from 2008 to 2013, while China's grew at 15.5% per annum. As it stands, Russia invests $87.8 billion, which is 4.1% of its GDP, while China invests $188 billion, at 2.0% of its GDP.

Of world players, the United States still expends the greatest resources of any nation on defence, 4.3% of its GDP goes towards defence spending, with a dollar value of $735.2 billion, considerably more than NATO, Russia and China combined.