The government’s new defence investment plan (DIP) has been announced with Prime Minister Sir Keir Starmer promising to “make the British people safer” with an additional £15bn in funding allocated to defence.
The plan sets out a ten-year strategy to modernise the armed forces in response to evolving global threats, particularly the increasing use of autonomous systems and the changing nature of warfare demonstrated in Ukraine.
The Prime Minister stated that defence spending plans will enhance the economy, by creating “almost 60,000 jobs”, adding that this will bring start-ups into the defence supply chain, which “pays off in every region and every community”.
“The fact is defence jobs are different. They are high skilled, well paid. They offer career paths, training and a greater sense of meaning,” Starmer commented. He announced that the government will be creating a new “£50bn defence export facility”, which Starmer describes as a “once in a generation boost.”
This £50bn of new support is on top of the UK Export Finance (UKEF), the government’s export credit agency’s existing £80bn limit, the largest expansion to UKEF’s financial support in its 100-year history. It will be used to support large-scale UK defence exports and strengthen Britain’s competitiveness in a rapidly growing global market.
This allocation will support British defence companies of all sizes, those that already export or are looking to expand internationally. This support will provide them with what they need to compete for major contracts on the world stage, while allowing the UK’s allies to benefit from a powerful package that combines the UK’s world-leading defence sector with a competitive, government-backed finance offering.
This support will come through UKEF guaranteeing bank loans for British defence exporters fulfilling contracts, or financing provided to other countries purchasing British defence products.
Tim Reid, CEO of UKEF, said: “Security is a strategic priority for governments worldwide, and the UK’s defence sector offers pioneering capabilities that allies are actively seeking. With billions of pounds available in new export financing, we are strengthening the sector’s global competitiveness while backing skilled British jobs and supporting long term economic growth.”
Also included in the new Defence Investment Plan is £5bn to increase the armed forces’ use of drones and autonomous weapons, plus plans for the Royal Navy to become a “hybrid navy”, using self-controlled vessels and AI alongside warships and aircraft and funding for six new warships. In addition, The Royal Air Force is set to invest in autonomous aircraft designed to operate alongside crewed fighters.
Alongside these technological upgrades, the government also aims to strengthen the UK defence industry, support domestic shipbuilding, improve munitions production and create skilled jobs across the country.
Kevin Craven, CEO of ADS, representing more than 2,000 organisations in aerospace, defence, security and space commented: “We welcome the Defence Investment Plan. We recognise that the environment in which we are all operating is not without its challenges, and we commend the inroads taken by the Secretary of State in the last two weeks towards a resolution. The clarity provided will support the UK’s defence industry to do what we do best: supply equipment, capabilities and services that strengthen the UK’s national security.
“Investment decisions today deliver tomorrow’s capabilities. The development of uncrewed capabilities, as well as investment in traditional platforms, is welcome. Coupled with this, support to significant, multilateral and technically innovative programmes are absolutely critical to ensuring our collective security and securing UK advantage. The initial investment in integrated air and missile defence is essential to protect the UK homeland, overseas bases and deployed forces from increasingly complex air, drone and missile threats. Strengthening export financing will unlock essential support to businesses of all shapes and sizes, particularly those in the SME category.
“The key now will be how this output is translated into contracts, and how this momentum is sustained through a clear and deliverable trajectory towards 3% of GDP by 2030 and 3.5% by 2035, reflecting the increasingly unstable geopolitical climate. We look forward to partnering with government on turning ambition into reality.”
However, despite stating that some road and energy projects may be scrapped in order to fund the new defence plan, the investment announced is still short of the £28bn the Ministry of Defence had asked for and one of the main reasons behind former Defence Secretary, John Healy’s recent resignation.
Responding to the announcement, The Conservatives have stated that the plan is “too little, too late”, with leader Kemi Badenoch criticising the defence investment plan as being insufficient and “barely half what the armed forces say is needed”. The Liberal Democrats say it “dangerously short-changed our armed forces”.
Graham Hoare, CEO of the Manufacturing Technology Centre (MTC), said: “The Defence Investment Plan brings renewed focus to an increasingly important question for national security: how quickly we can turn technological innovation into operational capability.
“What particularly stands out is the recognition that this cannot be delivered by government alone. The creation of the new Uncrewed Systems Taskforce acknowledges something many of us have been saying for years: innovation happens most effectively when government, industry, academia and technology providers work together with a shared purpose.
“Developing breakthrough technologies is only part of the challenge. Building the manufacturing capacity, supply chains, skills and industrial capability needed to produce them at pace and at scale is what ultimately strengthens resilience and security. By bringing together industry, government and academia, organisations such as the Manufacturing Technology Centre (MTC) help organisations develop the manufacturing processes, supply chains and skills needed for adoption, strengthening the UK’s industrial capability and national resilience.”
Jennifer Hughes, general manager of Telford-based engineering firm Transicon, welcomed the government’s long-awaited Defence Investment Plan, saying it provides greater certainty for the sector. However, she warned that unless procurement processes are reformed, many SMEs will struggle to benefit from the increased spending.
Hughes said smaller manufacturers continue to face significant barriers when trying to access defence contracts, including complex procurement routes, pre-qualification requirements and a lack of dedicated commercial resources to navigate the system.
“This plan presents huge opportunities and we need to ensure that small businesses have clearer access to the market,” she said. “Currently, contracts in the defence sector are hidden behind complex procurement routes, pre-qualification processes and portals that smaller businesses often do not have the time or resource to keep navigating.”
She added that government should work more closely with SMEs to remove these barriers, arguing that improved collaboration would help strengthen UK supply chains, reduce reliance on overseas suppliers and enable more domestic manufacturers to contribute to the country’s defence ambitions.
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