ADS Group Limited Salamanca Square 9 Albert Embankment London SE1 7SPenquiries@adsgroup.org.uk

www.adsgroup.org.uk +44 (0) 20 7091 4500

UK SECURITY SECTOR

OUTLOOK

2015AD

S102

47–0

9/15

FOREWORD

The UK’s security industry has a hard won international reputation for delivering solutions and responses to complex public safety challenges.

From providing protective equipment to help stop the spread of the Ebola through to the deployment of world-leading cyber capabilities, the investment in research and development by UK companies is enabling them to seize global market opportunities and support another year of growth.

The security industry is one of the UK’s most vibrant and diverse. Made up of many small, medium-sized and large businesses, the sector directly employs 71, 000 people, earning around 33 per cent more than the UK average. The largest proportion of jobs sit within research, design and engineering, core functions for driving productivity which has continued to outpace national levels, up 24 per cent in the past five years compared with just four per cent in the wider economy.

This ADS Outlook Report highlights a rise in turnover for the security industry, with our figures showing it generated £8.5bn last year, £3.4bn of which came through exports. Opportunities both at home and abroad are perceived as key drivers for growth over the next 12 months; however more firms than last year have expressed concerns about accessing the crucial R&D skills that have led to this success.

As the Government works to carry out its Strategic Defence and Security Review, the evidence is clear that security is now considered an equal partner with defence, with an increasing reliance on combining the strength and capabilities across both sectors.

Working with Government through initiatives such as the Security and Resilience Growth Partnership will remain a priority; as will identifying new business opportunities, at home and across international markets. The UK security sector is playing an increasingly important role in delivering national security and prosperity.

PAUL EVERITT Chief Executive, ADS Group

CONTENTS

Foreword 3

Summary 4

Securing Rapid Growth 6

Emphasis on Exports 8

Investing in Productivity 10

Supporting High-Skill Jobs 12

About ADS 14

About the Data 15

4 5

UK SECURITY INDUSTRY

£8.5bn 56%

71,000 2,100

£3.4bn 24%

TurnoverExpect >10%

growth

Security Sector has more than doubled in

last 5 years

40% of Security Sector revenue comes from exports

of UK Security Sector Companies employ Apprentices

Productivity growth, 2010 – 2014

UK Security Sector UK Economy

Employees Apprentices71,000

Direct UK Security Sector jobs

41,000Indirect UK Security

Sector jobs

Exports Productivity growth

£5.1bn Domestic Revenue £3.4bn

42%

42% 31% 15 10% %

46% 6%

<10% 10-24% 25-49% <50%

76

SECURING RAPID GROWTH

56% OF FIRMS EXPECT >10% GROWTH

01

£8.5bn

£3.4bn

6%

Turnover

Exports

Annual Growth

UK Security Sector Output Growth, Current Prices

<10% 10-24% 25-49% >50%

• UKSecuritysectorgrewby6%in2014

• Securityexportsgrewto£3.4bn

• 56%ofSectorexpectinggrowthgreaterthan10%

• GrowthdrivenbyexportopportunitiesintheEU,North America and the Middle East

0

1

2

3

4

5

6

7

8

9

2009 2010 2011 2012 2013

3.5

4.9

5.86.2

8.0

2014

8.5

Source: CEBR, ADS and ONS

42% 31% 15% 10%

• OverhalfofSecuritySectorcompaniesareexpectingtogrowby10%ormoreinthe next 12 months

• UKSecuritysectorgrewbyover6%in2014,andby28%onaverageeachyear(compound annual growth rate) over the last 5 years

• Keydriversofgrowthinthenext12monthsinclude:

–Growthofexistingbusiness(71%)

–Newexportopportunities(61%)

–GrowthofUKopportunities(46%)

£b

n

UK Security Sector output has more than doubled since 2009

Domestic Revenue

Export Revenue

98

% exporting to location / % entering new market

61% say growth is driven by new exports

68/2

N America

L America

Europe

ChinaAfrica

Middle EastAsia (excl China)

89/9

63/21 16/9

42/15

21/21

21/23

Source:ADS/GfK NOP Industry Intelligence Survey 2015

EMPHASIS ON EXPORTS02

£3.4bn

61%

6%

Exports

Say Growth is driven by exports

Growth in Exports

• 40%ofSecurityturnoverisgeneratedbyexports

• Locationswherecompanieshavecitedgrowingexport levels include Europe, North America and the Middle East

• CompaniesciteLatinAmerica,theMiddleEastandAfrica as the regions that they are most likely to focus their exports over the next 3 years

INVESTMENT IN SALES & PRODUCTION CAPACITY

Source:UKTI Defence and Security Export Statistics for 2014, KMatrix, ADS

• TheUKSecurityIndustryproducesproductsandservicesfor:

– Homeland Security, including counter terrorism, tackling organised crime and supporting the police

– Emergency response support, including humanitarian crises

– Cybersecurity,includingdigitalforensics,dataanalysis

– Major Event security, building on the legacy of the 2012 Olympics

Top 15 UK Security exports, by product type, £m

Situational Awareness

System Recovery & Data Cleansing

Access Control Systems

Communications

Intruder Alarm Systems

Identity & Access Based Services

Security Hardware

Sensing Systems and Heads

Manned Security Services

Encryption

Application Security

Ancillary Security Equipment & Services nec

Anti Malware

CCTV & Associated Systems

Business Continuity

0 50 100 150 200 250 300 350

1110

INVESTING IN PRODUCTIVITY03

£5bn

64%

24%

Gross Value Added

Increasing investment

Productivity growth since 2009

UK Security Sector GVA is contributing to UK growth, £bn

• UKSecuritysectorgrewby6%in2014.

• Companiesfocusedoninvestinginbusinessdevelopment, design and engineering and R&D

• SecuritySectorproductivityhasgrownby24%since2009,versusjust4%intherestoftheeconomy

Source: CEBR, ADS

0

1

2

3

4

6

5

2009 2010 2011 2012 2013 2014

2.0

2.8

3.33.6

4.7

5.0

DRIVING PRODUCTIVITY GROWTH

Security Sector GVA per employee & UK output per worker

Source: CEBR, ADS and ONS

• Overthepastfiveyears,productivityinUKSecuritySectorgrewbyaround24%

• Productivitygrowthacrosstheeconomywasuponly4%

• TheUKneedstorebalancetheeconomyandmakeitmoreproductivebyinvesting in high-productivity sectors, including the security sector, and in stimulating productivity enhancing investments in R&D and skills

£b

n

90 2009 2010 2011 2012 2013 2014

95

100

105

110

115

120

130

125

Security Sector UK Economy

1312

SUPPORTING HIGH-SKILL JOBS04

71,000

2,100

41,000

Employees

Apprentices & Trainees

Indirect employees

Company Support Staff

Sales/Business Development

Research, Design & Engineering

Production & Assembly

Consultancy

Other

UK direct Security employment, (000s)

• 71,000directlyemployedbyUKSecurityindustry

• 42%ofcompaniesemployapprenticesortrainees

• £36,100averagesalaryinUKSecurityindustry

• 1in4firmsconcernedoveraccesstorequiredR&Dand engineering skills

Source: CEBR, ADS

0

10

20

30

40

50

60

70

80

2009 2010 2011 2012 2013

35

41

50

58

66

2014

71

INVESTMENT IN HIGH SKILLED WORKFORCE BUT CONCERNS OVER R&D AND ENGINEERING SKILLS

% of employees in UK Security companies, by job function

Source:ADS/GfK NOP Industry Intelligence Survey 2015

• Over16,000R&D,Design&EngineeringjobsdirectlyintheUKSecuritysector

• £36,100averagesalaryintheUKSecurityindustry,33%morethantheUKAverage (approx. £27,000)

• 1in4companiesarenotconfidenttheywillbeabletoaccessthenecessaryR&Dand design and engineering skills to drive innovation

• Increaseofnearly10%frompreviousADSsurvey,incompaniescitingconcernsover access to Design and Engineering skills

11.5%

24.1%

16.5%

23%

7.8%17.2%

,000

s

1514

www.adsgroup.org.uk 0845 872 3231

ADS Group is the UK trade organisation representing the Aerospace, Defence, Security and Space sectors. ADS is focused on representing the interests of these valuable wealth producing industries in the UK and overseas to key stakeholders, government, and the media

ADS plays an instrumental role in bringing industry and government together, working closely and collaboratively to maintain and grow the UK’s world leading position in these industries. In doing so, these sectors will support and facilitate a sustainable UK economic recovery, securing future sector prosperity through a strong strategy and united approach.

Farnborough International Limited is a wholly owned subsidiary of ADS Group. The Farnborough International Airshow 2016 will run from 11-17 July 2016. In 2014, the Farnborough International Airshow saw over $200bn worth of confirmed orders.

In 2015, ADS Group commissioned two different research strands to assess the size, shape and priorities for the UK’s Aerospace, Defence, Security and Space sectors.

• ADS/GfKNOPSurvey. Between 06 March – 27 March 2015, GfK NOP conducted a web-based surveyed 900 ADS Members, asking 30 questions about employment, investment, export and growth trends. The Survey was web-based, with a 14% response rate.

• CentreforEconomics&BusinessResearch(CEBR).ADS commissioned CEBR to assess the turnover, employment and gross value added levels for each of ADS’s four sectors. Their research draws on data from Office National Statistics, Ministry of Defence, ADS Group and the ADS/GfK NOP Survey data.

ABOUT ADS ABOUT THE SURVEY