UK chancellor announces defence spending boost, other measures to support defence industry

Delivering her Spring Statement to the UK House of Commons on 26 March 2025, Chancellor Rachel Reeves outlined a significant immediate boost to UK defence spending and a number of measures intended to turbocharge the UK defence industry.

“In February [2025] the Prime Minister set out our government’s commitment to increasing spending on defence to 2.5% of GDP from April 2027 – the biggest sustained increase in defence spending since the end of the Cold War –and an ambition to spend 3% of GDP on defence in the next Parliament,” the chancellor noted. “That was the right decision in a more insecure world – we are putting an extra GBP 6.4 billion [EUR 7.68 billion] into defence spending by 2027 – but we have to move quickly in this changing world, and that starts with investment. Today, I can confirm that I will provide an additional GBP 2.2 billion for the Ministry of Defence in the next financial year: a further down-payment on our plan to deliver 2.5% of GDP by 2027.”

Reeves additionally stated that 10% of the UK Ministry of Defence (MoD) equipment budget would be spend “on new, novel technologies, including drones and artificial intelligence-enabled technology, driving forward advanced manufacturing production in places like Glasgow, Derby and Newport, creating demand for highly skilled engineers and scientists, and delivering new business opportunities for UK tech firms and start-ups”

She added that a protected budget of GBP 400 million would be established in the MoD, a budget that will rise over time, for UK defence innovation “and a clear mandate to bring innovative technology to the front line at speed”.

Perhaps most ambitiously, Reeves asserted, “We will reform our broken defence procurement system, making it quicker, more agile and more streamlined, and giving small businesses across the UK better access to Ministry of Defence contracts – something welcomed by the Federation of Small Businesses.”

Furthermore, Reeves stated, “We will provide GBP 2 billion of increased capacity for UK Export Finance to provide loans for overseas buyers of UK defence goods and services. I want to do more with our defence budget, so that we can buy, make and sell things here in Britain. I want to give our world-leading defence companies and those who work in them further opportunities to grow, and to create jobs in Britain, as military spending rightly increases all across Europe. To oversee all this vital work, my right honourable friend the Defence Secretary and I will establish a new defence growth board to maximise the benefits from every pound of taxpayers’ money that we spend, and we will put defence at the heart of our modern industrial strategy to drive innovation, which can deliver huge benefits for the British economy.”

Other defence-related measures announced by Reeves included a GBP 200 million investment in Barrow and Furness as the heart of the UK’s nuclear deterrent capability, the regeneration of Portsmouth naval base and the securing of better accommodation for UK armed forces personnel.