Events have moved quickly since President Zelensky visited the White House in late February. As it became clear that the Trump administration was going to limit economic and military support for Ukraine, European leaders moved quickly to convene a ‘coalition of the willing’ that could keep much-needed aid flowing. 

But what does this mean for the UK and a Chancellor operating within an extremely tight set of fiscal rules? In February, the Government announced that it will increase defence spending to 2.5% of GDP from April 2027, with an ambition to reach 3% in the next Parliament – changes funded by reductions to the budget for overseas development assistance. This was followed by several other announcements, including a £2 billion increase in the UK’s export finance capacity for defence and a £1.6 billion commitment to supply advanced air defence missiles to Ukraine. 

The challenge the defence sector now faces is how to deliver on these commitments at pace. The identification of defence as a ‘growth driving’ sector within the Government’s Industrial Strategy Green Paper will help, and the All-Party Parliamentary Manufacturing Group recently held a roundtable to discuss how the manufacturing sector can make the most of this opportunity. The key issues identified at this meeting were: 

Procurement. Awarding of contracts within the defence sector has historically been notoriously slow. The Ministry of Defence and its arm’s length bodies must be modernised to speed up the procurement process and allow more Small and Medium Sized Enterprises (SMEs) and innovators access to the market. The recently introduced Procurement Act will help with this. 

Sovereign capacity. Over the last 50 years, fluctuations in defence spending have seen sites scaled up and wound down, leading to mass unemployment. A long-term strategy for investment in sovereign companies will give business leaders the certainty to invest, improve productivity, and help drive economic growth in communities across the UK.  Where investment is made overseas, the UK loses all these advantages. 

Export support. Defence exports are tightly controlled by the UK Government, and rightly so. However, the Government must support UK manufacturing businesses by finding appropriate buyers abroad and making the case for buying British. 

Skills. Investment in the defence sector provides an opportunity for highly skilled and highly paid jobs across the UK. However, if these skills are not available, then businesses will invest elsewhere. There are several initiatives introduced by the current and previous Government that seeks to fill these ‘skills gaps’, including the introduction of Local Skills Improvement Plans, much-needed changes to the Apprenticeship Levy, and the creation of Skills England. However, there remains more to do, and this should start with improvement in recruitment and workforce conditions for teaching staff within Further Education colleges. 

SME access. The use of cutting-edge technology is vital to Ukraine’s ability to repel Russian aggression, and it is vital that SME’s and innovators can get timely access to the market. The Government must deliver on its promise to introduce a hub to allow SMEs better access to the defence supply chain. 

We look forward to the publication of the Industrial Strategy and Defence Industrial Strategy in the coming weeks. The All-Party Parliamentary Manufacturing Group and Manufacturing Commission are currently scoping for a policy inquiry to scrutinise and support these Strategies. If you would like to participate in this work, please contact APMG Policy Manager, Rob Allen robert.allen [at] policyconnect.org.uk (robert[dot]allen[at]policyconnect[dot]org[dot]uk).