Buying locally vs abroad I interested in the net effect of buying locally versus abroad.

The UK Government wants to buy a ship. It can buy from a UK or Korean shipyard. The unit price is the same for both yards: £10. A ten pound note. Nice and simple for the purpose of this example.

If the purchase is from the local shipyard, then the ten-pound note is delivered to the local yard directly from the bank account of the Government, having previously been forcibly removed from other UK citizens via taxation. This wealth is then distributed throughout the UK economy, via the employees and suppliers of the shipyard.

Some people advocate buying locally for this reason: they view this local economic stimulus as a positive side-effect of buying locally.

If the ship is purchased from Korea, assuming perfectly efficient currency exchange, then the wealth is transferred (having been converted into the Korean currency by a foreign exchange brokerage) to a Korean company. This wealth is then distributed around the Korean economy in a similar way, and presumably the Korean economy sees the economic stimulus.

But the original ten pound note has not vanished. It is now sitting in the bank account of someone behind the foreign exchange brokerage. This ten pound note will either be saved, or converted into another currency, or spent in the UK, because the UK is the only location where it is legal tender. So the money is STILL (eventually) spent in the UK, but a little more circuitously.

Is my understanding correct? 

Does this mean buying locally is in some sense equivalent to buying from another economy? Or where have I gone wrong?

Does the situation change if Korea has the same currency as the UK?
The currency is not as relevant as so many other more important factors. 

Buying a better ship is a very important factor. If a better ship is chosen and it is Korean, then the buyer (and seller) will benefit from their comparative advantages. I.e. instead of making British workers produce inferior ship, they can produce something they are better at instead, sell that to Koreans, and buy a better ship from them.

Another factor is the fairness of trade. Is the trade fair? Are there any tariffs, subsidies, dumping, theft, currency manipulation, corruption, extortion, forced labor, etc. etc. going on? Maybe not in South Korea and UK, but generally international trade is never perfect.

National security. Are you buying a military ship? A tanker? Is the deal big enough to be abused for political purposes?

There are many more of course.

Currency element is just that one item the list that I highlighted.

That's why big deals like ships, which are more like into 10 billion pounds, usually require a lengthy public review process to go over all of these issues.

On the other hand, if we are talking about 10 pound soda bottles, then currency is about irrelevant for large to medium businesses that can fix exchange rates using Forex futures or swap contracts at virtually no cost. Different currencies is a problem for smaller businesses because accessing heavily regulated financial markets is pretty tough for them and they usually have to bear exchange rate risks and pay hefty commissions to the local banks.