Reform for defence supply chain

Homeland September 16, 2025

John Healey Editorial credit: Fred Duval / Shutterstock.com

The Defence Secretary’s keynote speech at DSEI 2025 outlined a significantly reformed approach to the defence industrial sector, aiming to strengthen the supply chain and create numerous opportunities for suppliers.

Here’s a breakdown of the most important information, highlighting the supply chain and opportunities for suppliers:

1. A Radically Different Relationship with Industry and Significant Investment

The government is committed to building a **radically different relationship with industry, investors, and innovators** to meet new defence threats. This is backed by the **largest sustained increase in defence spending since the Cold War**, offering the industry the certainty of 10 years of rising defence spending. This certainty is already having an impact, with over 900 major contracts signed since the last election, over £1.4 billion of foreign direct investment into defence, and £1.8 billion in direct MOD spend in the UK this year.

2. Defence Industrial Strategy and Economic Growth

The core of this new approach is the **Defence Industrial Strategy**, published earlier that week, which aims to make defence an “engine for growth”. It is backed by **more than £770 million in government investment over the next three years**. The strategy is designed to back British industry, create British jobs, and drive greater British innovation. The overall goal is to produce a “Britain’s defence industrial strategy,” developed *with* industry rather than *for* it.

3. Procurement Reforms to Enhance Speed and Confidence

Acknowledging past issues of slow, complex, and wasteful procurement, the strategy introduces several key reforms to get equipment from the factory to the front line faster:

* Segmented approach to government procurement with time-to-contract targets.

* Creation of a powerful new national armaments director.

* Introduction of a five-year acquisition pipeline.

* These measures are designed to give businesses and investors more confidence to invest in the British defence industry.

4. Offset Policy for UK Economic Benefit

For the first time ever, an offset policy will be introduced in consultation with industry. This means that when decisions are made to buy abroad from allies, the UK’s economy will still be strengthened in return through new jobs, dual technologies, or investments.

5. Dedicated Support and Increased Spending for Smaller Firms (SMEs)

Small and medium-sized enterprises (SMEs) are recognised as an indispensable part of the industry’s future. The government aims to change the perception of the MoD being a difficult customer for SMEs:

* An Office of Small Business Growth has been set up to support SMEs in doing business with defence.

* A new target has been introduced to increase direct spending with SMEs to £7.5 billion by 2028, representing a 50% uplift from previous levels.

* QinetiQ is introducing a “test and evaluation innovation gateway” to accelerate access and availability of test facilities for smaller firms, addressing a long-standing challenge.

6. Emphasis on Innovation and Novel Technologies

Innovation is at the heart of the strategy, with a recognition that getting the latest technology into the hands of warfighters provides a battlefield edge and reinforces deterrence.

* The government is committed to spending at least 10% of the equipment plan on novel technologies from this year.

* Existing agencies have been combined to create the new UK Defence Innovation (UKDI, backed by £400 million of ring-fenced investment. UKDI will have new freedoms to make decisions on priorities and funding, and will produce technologies for the Armed Forces, starting with innovation challenges on novel drones.

7. Boosting Exports and International Partnerships

Exports are highlighted as one of the most promising, yet often overlooked, opportunities for the British defence industry.

* The biggest ever British warship deal in history was signed with Norway, a £10 billion frigate contract securing at least 4,000 jobs for 15 years.

* A new Office of Defence Exports will be established to unify responsibility for defence exports within the MoD, driving government-to-government support for export deals.

* The export licensing system will be improved with a new digital platform, better staff training, and procedures allowing applications during the bidding process.

8. UK-Ukraine Cooperation as a Model for Industrial Partnership

The speech highlighted a significant new industrial partnership with Ukraine, demonstrating that wartime necessity can drive constant invention:

* Ukrspecsystems, Ukraine’s largest drone manufacturer, is investing £200 million in two new facilities in the UK, creating 500 high-skilled jobs in East Anglia. This is the first major investment by a Ukrainian defence company in the UK.

* Through Project Octopus, Ukraine will share technology and IP for a highly effective, low-cost uncrewed interceptor drone (initially built with a drain pipe). The UK and Ukraine will then rapidly develop and mass-produce thousands of these drones for Ukraine monthly. This provides Britain with access to the best developing battlefield technology and strengthens both countries’ security and economies.

9. Defence Dividend and Skills Investment

The increased defence investment is intended to generate a “defence dividend” across all parts of the UK, boosting British jobs, businesses, and innovation.

* An extra £250 million is committed to defence growth deals in North Ireland, Scotland, Wales, and two in England.

* The ADS calculates these plans could create an extra 50,000 jobs in the defence sector over the next decade.

* To fill these jobs, a major investment in defence skills is planned, with £182 million over the next three years, the biggest investment in a defence skill plan for decades. This is government’s commitment to help businesses build the necessary workforce.

In summary, the speech outlines a comprehensive strategy to energise the UK defence supply chain through significant government investment, procurement reforms, targeted support for SMEs, a strong focus on innovation, and proactive measures to boost exports and international industrial partnerships, all while creating jobs and economic growth across the UK.

Image: Fred Duval / Shutterstock.com

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