How UK firms can tap into the £400m UK Defence Innovation Fund

June 2, 2025

The Defence and Security Accelerator (DASA) is pleased to launch a new Themed Competition called AWE – Advanced Electronics and Electromechanical Devices.

In the Spring Statement, Chancellor Rachel Reeves reaffirmed the government’s commitment to defence modernisation with the UK Defence Innovation Fund (UKDI) allocating £400m to accelerate defence spending 1.

The investment isn’t just about boosting military spending though, says Karim Budabuss, Director – Grant Advisory at ForrestBrown. It signals a broader ambition to position defence as a driver of national innovation and opens the door to greater funding for businesses breaking new ground in the sector.

Defence is one of the government’s eight priority sectors under its Industrial Strategy2 and the creation of the UKDI reflects a targeted focus on transformative technologies such as autonomous systems and advanced materials. These innovations directly contribute towards strengthening the UK’s national security. But beyond military capability, this fund could also act as a catalyst for breakthroughs in a range of civilian technologies, from healthcare to energy efficiency.

This approach is backed by serious investment. Of Innovate UK’s £965 million annual budget for this fiscal year, over 40% is expected to flow into defence, highlighting that the government is betting big on the sector’s potential to drive economic activity.

Understanding eligibility and access
The Ministry of Defence (MOD) has indicated that funding calls will begin rolling out between May and July 2025, with major announcements expected from July onwards. While the headline £400m will be a huge boost for the industry, accessing this funding will be highly competitive. The process will also differ significantly for large defence contractors versus smaller firms.

There is speculation over how the fund will be distributed, with the bulk of funding expected to be channelled directly through the MOD, which will in turn contact delivery partners. This inherently favours ‘established defence giants’ who are already embedded within government procurement frameworks.

For smaller players, the route to securing funding is more complex. It’s likely to involve detailed application processes, forming partnerships, or integrating into the supply chains of larger organisations. This is why it’s crucial for SMEs to understand where they fit into the defence value chain and to think creatively about partnerships that might enhance their access. Identifying potential partners like primes, universities, or innovation clusters can be a key step in building a viable route to funding.

The ‘innovation ripple effect’
While exact criteria and project scopes will be outlined in individual funding calls, early indicators suggest a strong emphasis on dual-use technologies. Projects that embrace cross-sector collaboration are expected to be especially well-placed to secure funding.

The UK fund appears to be adopting aspects of the US defence innovation model, where ambitious government spending has led to groundbreaking civilian technologies (such as the internet, GPS, and even microwave ovens). In this system, funded projects that crossed the bridge between civilian and military applications were prioritised in selection to drive long-term commercial impact.

As such, smaller innovators developing niche technologies or dual-use solutions shouldn’t be discouraged from applying to the UKDI, particularly those with real-world applications. There’s a common misconception that defence funding is limited to traditional hardware like
warplanes and missiles. In reality, the scope is far broader. The Ministry of Defence will be looking for innovations that can help strengthen national security but also have valuable applications in other areas – such as healthcare, energy, or advanced manufacturing – so they can drive wider economic and societal benefits for civilians beyond defence.

Take, for example, a cutting-edge spray designed to temporarily stop bleeding on the battlefield. While its immediate use is clear for soldiers in combat, it could just as easily be deployed by paramedics or emergency responders.

Preparation is key
Firms interested in applying for the UKDI must act now to align their strategies with these priorities. Preparation starts with understanding procurement dynamics, how funding flows from the MOD, who key contractors are, and where the firm fits into the value chain.

Larger firms should prepare for direct engagement, leveraging existing MOD relationships and frameworks. For SMEs, it will be essential to begin mapping potential partners that can offer new routes to secure funding. Ultimately, those who frame their value in terms of both strategic capability and civilian utility will be best positioned to succeed. Forming strong alliances, especially those that may cross traditional industry boundaries, will go a long way given the competitiveness of the fund.

If utilised effectively, the UKDI has the potential to be a strategic catalyst for wider UK innovation. While paths to funding will vary by company size and capabilities, there are significant opportunities available for those with projects eligible for qualification.

For firms in aerospace, advanced manufacturing, healthcare, and beyond, those who can frame their technologies with both military relevance and civilian potential will be best placed to thrive in this next chapter of the UK’s innovation strategy.

Article submitted by Karim Budabuss, Director – Grant Advisory at ForrestBrown.

1
assets.publishing.service.gov.uk/media/67e3ec2df356a2dc0e39b488/E03274109_HMT_Spring_Statement_Mar_25_Web_Accessible_.pdf
2
CP1298 – Spring Statement 2025