The UK’s Defence Industrial Strategy 2025 and other key developments
The UK’s new Defence Industrial Strategy (DIS) aligns with wider security reforms, including a new EU security cooperation framework, the Strategic Defence Review, the National Security Strategy, and major MOD structural changes. It sets out how defence will serve as a growth sector for the UK economy whilst delivering greater readiness, resilience, and speed.
Defence is designated a national growth sector which employs 272,000 people, nearly 70% outside southeast England. The DIS promises a National Wealth Fund (subject to legislation) and commits the British Business Bank to support capital‑intensive projects and scaling. The UK’s export credit agency’s lending headroom is to increase to £10bn, with £3bn ring‑fenced for defence.
The focus on “UK‑based industry” emphasises openness to global supply chains while safeguarding resilience. The government is exploring a flexible, Australian‑inspired offset policy to secure economic returns without distorting markets; recent interventions, including support for a semiconductor facility and Sheffield Forgemasters, signal a willingness to protect critical capabilities.
Procurement timelines are being compressed—commercial buys can move from initiation to contract in as little as three months. A newly empowered National Armaments Director has end‑to‑end responsibility for non‑nuclear procurement, with eight procurement budgets consolidated into one to speed decisions and strengthen accountability. The strategy underscores resilience, wargaming with industry, and surge capacity, notably for munitions. While not a platform list, the DIS supports priority areas including the continuous at‑sea nuclear deterrent, shipbuilding, combat air, and frontier technologies such as AI and quantum.
Separately, the MOD’s strategic partnership with US‑based data analytics firm Palantir aims to unlock £1.5 billion of investment. It establishes London as Palantir’s European defence headquarters and accelerates AI‑enabled military systems, reinforcing the UK’s position at the forefront of NATO innovation.
Furthermore, the UK’s defence tech ecosystem is drawing foreign start-ups, with many European firms establishing UK bases or manufacturing sites to benefit from supportive policy and market access. The UK’s growing commitment, including a £400 million ring‑fenced defence innovation fund and streamlined procurement, signals clear ambition to lead NATO innovation. A new “buy British” approach is prompting overseas companies to open UK arms and manufacture, driven by expectations of increased contracts and access to UK tech talent. This dynamic environment is solidifying the UK’s influence in the start-up defence tech market.
