Further support for the defence industry is being set out by the Chancellor with billions of pounds unlocked for UK defence companies that export overseas
The UK Chancellor of the Exchequer, Rachel Reeves, announced today a significant increase in support for the UK’s defence industry, unlocking billions of pounds for UK defence companies that export overseas. This move is expected to drive economic growth and create jobs across the country.
During a visit to Scotland, Reeves revealed a £2 billion increase to UK Export Finance’s (UKEF) Direct Lending capacity for defence. This increase will raise UKEF’s lending capacity from £8 billion to £10 billion, enhancing the competitiveness of the UK’s defence industry and enabling exporters to expand their business through sales to allies worldwide.
UKEF’s Direct Lending facility provides loans to foreign governments to purchase UK goods and services. In the 2023/24 fiscal year, UKEF issued £8.8 billion worth of loans, guarantees, and insurance to support UK exports, benefiting 650 exporters of all sizes and supporting 41,000 jobs across the UK.
This announcement builds on UKEF’s strong track record of supporting the defence sector, which includes an £8.8 billion guarantee for exports of air defence systems to Poland, support for the export of Typhoon aircraft to Qatar, and the sale of ex-Royal Navy minehunting vessels to the Ukrainian Navy.
The uplift in lending capacity is a central pillar of the government’s upcoming Defence Industrial Strategy and is expected to drive tangible increases in financial support for UK defence exporters. This move follows the Prime Minister’s recent £1.6 billion commitment to supply advanced air defence missiles to Ukraine, which supports 700 existing jobs at Thales in Belfast.
Chancellor Rachel Reeves emphasized the importance of the initiative, stating, “The world is changing, and we must bring about a new era of security and renewal that protects working people and keeps our country safe. This increase to UKEF’s lending capability is our Industrial Strategy in action, bolstering our defence industry and supply chains, creating jobs, and driving growth across the UK.”
Business Secretary Jonathan Reynolds added, “A strong defence sector is vital for a Britain that’s both secure at home and strong abroad. Our Plan for Change has put defence at the heart of our Industrial Strategy, helping us drive growth while bolstering our national security for the long term.”
Defence Secretary John Healey highlighted the significance of the move, saying, “A strong UK defence industrial base is essential for our national security, enabling us to rearm and innovate at a wartime pace. This increase in lending capacity will make our country more secure and ensure the defence sector is an engine for growth in every region and nation of the UK.”
Scottish Secretary Ian Murray underscored the impact on Scotland, noting, “Scotland’s world-class defence industry is playing a big role in meeting the global security challenge. This £2 billion in new lending will boost skilled jobs and economic growth in Scotland.”
The Chancellor’s visit to Scotland also included a tour of a defence company, highlighting the government’s commitment to increase defence spending to 2.5% of GDP from April 2027. This increase is part of a broader strategy to address global instability, including Russian aggression in Ukraine, increasing threats from malign actors, rapid technological change, and the impacts of climate change.
Scotland, a hub for the UK defence industry, is home to companies such as Babcock and BAE Systems. In 2023/24, Scotland’s defence sector received £2.14 billion in UK Government spending, supporting approximately 25,600 jobs. Chris Allam, Managing Director for MBDA UK, welcomed the announcement, stating, “UK Export Finance lending has and will continue to be a vital tool for the defence industry. Increasing its capacity will enable MBDA to secure more opportunities to deliver strategic capabilities to the UK’s key allies, strengthening relationships and making the UK competitive in a global marketplace.”
This initiative marks a significant step in the UK’s efforts to enhance national security and drive economic growth through the defence sector.
