UK government defence spending reached a record £34.1bn in 2025/26, providing a significant boost to manufacturers and suppliers across the country.
New figures from the Ministry of Defence (MOD) show that spending with UK industry increased by 3.2% in real terms during the year, equivalent to an additional £1.1bn. The figure represents the highest level of MOD expenditure with UK industry since records began in 2013/14. The increase comes as the government seeks to strengthen the UK’s domestic defence industrial base, with manufacturers expected to play a central role in delivering new military capabilities while supporting wider industrial growth.
The impact of increased spending is being felt across the country. Northern Ireland recorded the largest percentage increase, with defence expenditure rising by 63% to £464m. The East of England saw spending increase by 24.7%, while expenditure in the East Midlands rose by 21%. The South East remained the largest recipient of MOD spending, at £8.45bn, followed by the South West at £6.66bn and the North West at £5.42bn.
SMEs are also benefiting from the increase in defence procurement. Direct MOD spending with small and medium-sized enterprises rose by £100m over the past year to £1.3bn. The Government said the increase supports its ambition to broaden the defence supply chain and enable more smaller businesses to participate in major programmes.
Manufacturing-intensive areas of defence spending also recorded significant increases. MOD expenditure on weapons, ammunition and military fighting vehicles reached £2.4bn in 2025/26, an 18% real-terms increase on the previous year.
The wider economic impact is already substantial. Separate MOD estimates show that defence spending with UK industry supported 274,000 direct and indirect jobs in 2024/25, an increase of 26,000 on the previous year. This included 164,000 direct roles and 110,000 jobs supported through supply chains.
Shipbuilding and repair accounted for a particularly significant share of this impact, with £6.9bn of MOD expenditure supporting 41,500 direct jobs in the sector and an estimated 32,800 additional jobs across the wider UK supply chain.
The Government has linked the latest figures to its £298bn Defence Investment Plan, which is intended to provide sustained investment in UK defence over the next four years.
For manufacturers, the combination of higher defence spending, increased SME participation and long-term procurement programmes points to further opportunities across the industrial supply chain, from advanced manufacturing and electronics to engineering, shipbuilding and specialist components.
The MOD said its investment with UK industry amounted to the equivalent of £490 for every person living in the UK during 2025/26, up from £480 the previous year after accounting for inflation.
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