Does UK Trade and Investment generate £19 for every £1 spent?
16th May 2012
"You put a pound of taxpayers money in [to UK Trade & Investment], you get nineteen quid back."
Lord Digby Jones, BBC Today programme, 14 May 2012
On the Today programme this week Lord Digby Jones claimed that UK Trade and Investment (UKTI) generates £19 for every £1 of taxpayers money it spends.
UKTI is a joint government department of the Department for Business, Innovation and Skills and the Foreign and Commonwealth Office. UKTI supports UK businesses who want to trade internationally and overseas businesses wanting to invest in the UK.
The figures that Lord Jones are referring to can be found in UK Trade and Investment Resource Accounts 2009-10 report:
"£19 additional profit generated for every pound spend on UKTI trade services."
However, Lord Jones seems to be using out of date figures - as UKTI has also published a report covering 2010-11. This report shows that for every £1 spent by UKTI £22 is generated:
"In 2010-11 British companies attributed an additional £6bn to their bottom-line profits as a result of working with UKTI, up from £5.2bn the previous year. This represents £22 for each £1 spent on UKTI trade services, up from £19:£1 for 2009-10."
This benefit to cost ratio, according to the report, is based on businesses' own judgments of how much of their additional profit can be attributed to UKTI. This evidence is gathered from surveys conducted by OMB research, an independent market research company.
OMB estimate that, in 2010-11, UKTI generated £6,178 billion in additional profits. This figure is then divided by the costs of trade support - £263 million - and this is how we arrive at the benefit to cost ratio.
This is just one way of measuring the economic benefit of UKTI though. It could also be measured using the number of additional imports, which was used prior to 2002, or by measuring Gross Value Added (GVA).
Both of these measurements would produce a larger figure than £6 billion. For instance the report calculates that using GVA would produce a figure of £15 billion.
The report's estimate does also not, however, take into account the wider economic benefits of UKTI support. In 2010-11 UKTI's trade clients reported that 126,500 jobs were either created or safeguarded as a direct result of UKTI help as well. As exporting firms are 11.4 per cent more likely to survive than non-exporting ones (according to the report), these jobs are also more likely to be secure. UKTI also benefits the economy by promoting the reputation of British businesses overseas.
Nor does it take into account the foreign direct investment that UKTI helps bring into Britain or the help provided by UKTI to defence companies. In 2010-11 the report estimates that UKTI directly assisted 810 inward investment projects and generated almost £6 billion in new defence industry business, increasing the UK's share of the global defence market to 22 per cent.
Lord Jones's claim that UK Trade and Investment generates £19 for every £1 of taxpayer money has grounding, but is now based on out of date figures. The latest report shows that for every pound of taxpayer money UKTI generates £22.
However, this is based on just one way of measuring the economic benefit of UKTI's work. The report's estimate does not include the wider economic benefits of UKTI support or the amount of foreign investment it brings in or the amount of money it generates for the defence industry.