Defence Demand Surges Across UK Innovation Economy But Procurement Delays Threaten to Stall Growth

Homeland June 22, 2026

NATO’s Defence Innovation Accelerator for the North Atlantic (DIANA) has launched five new challenges for 2024.

New research from Barclays paints a clear picture of where the UK innovation economy is heading: towards defence. More than half of UK tech and innovation firms (57%) are now targeting defence and national security markets, with 62% actively adapting their products and services to meet sector requirements. Defence-focused businesses recorded a 13.1% increase in cash inflows year-on-year, against a 9.5% fall for Science and Engineering R&D firms more broadly, a sharp divergence that reflects where demand is concentrating.

The data, drawn from a survey of 501 UK tech and innovation firms alongside analysis of Barclays’ anonymised data from around 26,000 UK innovation businesses, also shows that engagement is moving beyond intent. 64% of firms are either already bidding for, or planning to bid for, defence or public sector contracts, and 57% are seeking or planning to seek funding specifically to deliver on that pipeline.

But the route to revenue is slow. Defence and dual-use businesses report average public sector sales cycles of more than eight months. 54% say procurement timelines have worsened over the past two years, 56% cite compliance and security requirements as a significant barrier, and 28% identify a lack of visibility over contract timing and pipeline as a key problem. For SMEs operating on limited working capital, that combination is damaging: 50% of all respondents report customers pausing or delaying spending, creating unpredictable cash flow at exactly the point firms need to invest to scale.

The financing implications are direct. As Helena Sans, Head of Innovation Banking at Barclays UK Corporate Bank, noted: “Where procurement timelines are unclear and pipeline visibility is limited, it becomes harder to lend against that future income, making greater transparency, particularly in public sector pipelines, critical to unlocking growth.”

For the defence supply chain, the research reinforces what businesses already know from experience. The demand signal from government is strong, with 28% of firms believing their technology could strengthen national security or defence capability within five years. The willingness to invest, adapt, and bid is there. What is holding businesses back is not ambition but the structural friction of procurement: compliance burdens that fall hardest on SMEs, opaque timelines that make financial planning difficult, and lengthy pilots that consume resource without guaranteeing conversion.

With the Lords Industry and Regulators Committee taking evidence on exactly these barriers, the Barclays data provides quantitative backing for what many supply chain businesses will want to put on the parliamentary record.

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