UK businesses see Defence Investment Plan as catalyst for growth but call for more support

Four in 10 (40 per cent) UK businesses surveyed, operating across multiple sectors, expect their involvement in the UK defence sector to increase over the next 12 months, according to the latest Barclays Business Prosperity research.

The research also shows that two thirds (66%) of UK businesses surveyed believe the government’s Defence Investment Plan will create meaningful growth opportunities for UK firms.

Businesses are particularly positive about the wider economic benefits of defence investment, with almost half (48%) expecting the plan to have a positive impact on their region and 38% who expect a positive impact on their own business.

Leaders cited skills and workforce development (59%), attracting new investment and partnerships into their region (53%), boosting research and development in new technologies (52%), and strengthening international defence partnerships and exports (50%) as the primary expected benefits.

More than a third (36%) surveyed expect to hire new staff over the next 12 months to support defence-related contracts, while a similar proportion also plan to increase investment in workforce and skills development (34%), research and development (31%) and digital, cyber or advanced technologies (31%).

Business appetite rises but procurement and finance barriers remain

While business appetite to participate in defence supply chains is clear, practical barriers remain. Key obstacles cited by businesses include funding and cashflow availability (26%), skills shortages (25%) and uncertainty around procurement processes (24%).

More than a quarter (27%) of businesses say faster, clearer and more efficient procurement processes would have the greatest influence on whether they work with the UK defence sector. Access to financing, scale-up capital or working capital (25%) and clearer long-term demand signals from government (25%) were also among the most important factors.

Defence is first and foremost a matter of national security, but our research shows businesses also see its potential to support wider economic growth. For manufacturers of all sizes looking to enter defence supply chains, the opportunity is significant.
Stuart Foster, Head of Coverage, Barclays UK Corporate Bank

Two thirds (66%) say a government-backed Defence Guarantee Scheme to support businesses overcome repayment risks, would either encourage their business to enter the defence supply chain or be beneficial if they are already involved.

The research also highlights the role finance could play in unlocking investment. While 61% of businesses say they would be confident financing the upfront costs of delivering a defence-related contract, one in five (21%) are not confident they could do so, suggesting financing remains a barrier for some firms.

A further 23% say government should give financial services firms clearer visibility of future revenues, enabling lenders to support businesses delivering defence projects.

Stuart Foster, Head of Coverage, Barclays UK Corporate Bank, said: “Defence is first and foremost a matter of national security, but our research shows businesses also see its potential to support wider economic growth. From skills and innovation to regional investment and supply chain development, the opportunity extends well beyond the defence sector itself.

“The priority now is making those opportunities easier to access. Clearer procurement, better visibility of future revenues for lenders and targeted support can help unlock the finance and investment needed for the sector to innovate, grow and deliver. Working together, the public and private sectors can help businesses invest, hire and scale with confidence, while building the UK’s defence capabilities for the future.

“For manufacturers of all sizes looking to enter defence supply chains, the opportunity is significant. Businesses should focus on understanding the requirements of prime contractors, investing in the skills, accreditations and cyber resilience standards expected by the sector, and actively engaging with defence and industry networks to build the right relationships.

“Many firms already have capabilities that are highly relevant to defence, whether that’s advanced manufacturing, engineering expertise, digital technologies or specialist components. The challenge is often translating those strengths into opportunities within the defence ecosystem. Businesses that take a proactive approach, identify where their products or services can add value, investing ahead of demand and building partnerships across the supply chain will be best placed to benefit from increased spending.

“Growth opportunities of this scale also require businesses to think carefully about how they fund expansion. Whether it’s investing in new equipment, increasing capacity, strengthening digital capabilities or recruiting skilled workers, access to finance can play an important role in helping firms scale at pace. Through initiatives such as our £22bn Barclays Business Prosperity Fund, and our extensive sector expertise, we are helping businesses invest for growth and seize emerging opportunities.

“The firms that will get ahead are those that act early. While businesses often cite challenges such as navigating complex procurement processes, securing the right accreditations and identifying where they fit within established supply chains, those barriers are not insurmountable. By building the right capabilities, investing with confidence and positioning themselves within defence supply chains now, manufacturers can put themselves in a strong position to benefit from long-term growth opportunities for both the sector and the wider UK economy.”

Spyros Svoronos, Global Head of Industrials Investment Banking, said: “Globally, the defence sector is at an inflection point, with a critical need to mobilise long-term private capital alongside traditional government funding to support growing security and resilience demands. Meeting these investment needs will require innovative capital solutions that can help scale the technologies and capabilities increasingly shaping the future of defence, including AI, cyber, advanced manufacturing and energy resilience.”