01174 621101
The UK government’s commitment to growth is gaining momentum, particularly in the defence sector and through support to small and medium enterprises (SMEs).
In a significant announcement in February, the Prime Minister, Sir Keir Starmer MP, revealed plans to increase defence spending to 2.5% of GDP by April 2027, with an ambitious target of reaching 3% in the next parliamentary term (2029-2034).
This increase in spending is primed to benefit every region in the country. Currently, 68% of the defence budget is spent on UK businesses outside of London and the South East. Nevertheless during 2023-24, the UK Ministry of Defence (MOD) earmarked substantial funds across various regions, the largest of which was £7.1 billion in the South East, followed by £6.9 billion in the South West, which was followed by £3.8 billion in the North West of England with the other regions following this latter figure, respectively.
Early indication on the Defence Industrial Strategy suggests that several areas, such as artificial intelligence, autonomous systems, combat air, cyber capabilities, missiles, nuclear submarines, quantum technologies, shipbuilding design, and space, possess the highest growth potential.
However, it is concerning that only 4% of defence spending, outside of London and the South East, goes to SMEs. To address this disparity, the government has announced further plans to launch a new hub which will provide SMEs with improved access to the defence supply chain.
Additionally, HM Government has committed further to the establishment of direct SME spending targets for the UK MOD by June 2025. This initiative represents a vital opportunity for small companies to demonstrate their innovations, agility, and skilled workforce, which, in, turn can enhance Britain’s defence capabilities.
The new hub and investment targets will ensure that increased spending translates into tangible benefits for SMEs, thereby supporting job creation, growth, and innovation.
This could influence the prospects of up to 12,000 SMEs, empowering them to secure finance and invest in workforce training. WEAF is keeping watch on details of the hub and will share more information once it is available.
In addition, the Chancellor, Defence Secretary, and Business Secretary have also confirmed the establishment of a new UK defence innovation organisation which will launch at the upcoming Spring Statement. This unit will collaborate with innovative businesses to expedite the deployment of the latest military technology to the British Armed Forces and connect the expertise of the UK’s technology and manufacturing sectors.
As part of a defence innovation drive, the government will also look to enhance investment in defence start-ups and scale-up technology and capability, including through the National Security Strategic Investment Fund. Ministers will work with venture capital and investment parties, as well as industry, to utilise private investment in the technology of the future.
Sources:
New measures to boost small businesses benefitting from UK’s defence investment – GOV.UK