UK suppliers risk missing out on extra defence spending

Increased defence spending risks benefiting overseas suppliers instead of building capability in the UK unless the government gives businesses clearer long-term contracts and procurement timelines, according to new Barclays Business Prosperity research.

Four in ten UK businesses (41%) warn the country could become more reliant on imported defence technology without that clarity. The findings show that UK businesses back higher defence spending but have far less faith that the UK can turn it into domestic investment, manufacturing and jobs.

Nearly two-thirds of businesses (65%) want at least half of increased defence spending to go to companies operating and investing in the UK. Without clearer procurement, more than a third (36%) expect UK businesses to reduce or delay investment, and one in three (33%) say defence technology firms could look overseas for investment instead.

Businesses also support reform. Three in five (61%) back a dedicated route allowing technologies that successfully complete trials to move more quickly into government contracts, and just 8 per cent oppose it.

Certainty would unlock investment

Businesses say a clear, long-term pipeline of defence investment in the Budget would prompt action. A third (33%) would invest in technology, equipment or production capacity, and 29% would recruit or train more staff or bring more activity into the UK.

Access to finance remains a barrier, even for businesses that win work. More than a quarter (26 per cent) say they would not be confident they could fund the upfront costs of delivering a significant defence contract before being paid.

The findings reinforce Scaling UK Defence Tech report. The report recommends a permanent Defence Technology Accelerated Procurement Pathway, more growth-stage financing, and a defence-focused extension of the British Business Bank Growth Guarantee Scheme to improve access to working capital.

Matt Hammerstein, CEO, Barclays UK Corporate Bank, said: “UK businesses don’t lack the technology or the ambition to strengthen our defence base, but too often the system holds them back. Firms prove their technology works, then stall waiting for a contract, and by the time it arrives the investment, talent and production may have moved elsewhere.

“The Government has a chance to fix that, and it doesn’t even need to wait for final decisions on defence spending to do so. Clearer demand signals, a faster route from trials into contracts and finance at the right stage would give businesses the confidence to invest, scale and create jobs here. Get it right and defence spending becomes one of the UK’s strongest growth levers. Get it wrong and we risk paying to build capability overseas.”