Two Labour MPs, and , have published a report
entitled 'Rewiring British Defence Financing' calling for reform
of defence funding.
The report says the UK is at a pivotal moment for its national
security and economic resilience, with growing geopolitical
tensions and rapid technological change making the financing and
scaling of its defence sector a strategic priority. Despite the
Government's commitment to higher defence spending, persistent
structural barriers in the financial ecosystem are hampering the
ability of British defence firms—particularly SMEs—to grow,
innovate, and strengthen the UK's sovereign capabilities.
Based on engagement with industry stakeholders, the report
identifies six systemic challenges—capital, credit, cashflow,
contracting, compliance, and consensus shift—that undermine the
competitiveness and sustainability of the UK defence industrial
base.
Key findings reveal that ESG concerns are only one part of
broader financing issues. Defence SMEs, in particular, face acute
problems accessing capital, credit, and even basic financial
services due to their reliance on government contracts and
perceptions of sector risk.
Procurement delays exacerbate cashflow difficulties, while
compliance burdens and a lack of transparency across supply
chains further constrain operations and investment.
To address these challenges, the report recommends targeted
interventions, including reforming existing funding structures
like the National Security Strategic Investment Fund, launching a
Defence Guarantee Scheme, and introducing state-backed cashflow
financing. It also calls for structural reforms in procurement
and compliance processes, as well as broader efforts to shift
public and institutional attitudes toward defence investment.
To read the full report, click here.
