Chancellor prioritises UK defence supply chain

Homeland October 2, 2025

Scotland is playing a crucial role in the Navy’s shipbuilding pipeline and the UK’s security, Defence Secretary Grant Shapps said on a visit to key shipyards.

The Chancellor’s recent declaration to prioritise British shipbuilding and domestic steel in defence procurement has drawn a favourable response from the industry, signalling potential changes to the UK’s supplier landscape. In remarks delivered at Labour’s Annual Conference in Liverpool, Chancellor Rachel Reeves MP emphasised that the renewal of Britain’s economic base must rest on “strong foundations: Domestic steel capacity, defence capability, and energy security.”

Under the proposed reforms, bids for public contracts would be weighted in favour of firms that base production in the UK. In practice, this would mean that defence suppliers – shipyards, steel fabricators, and wider naval systems companies – would gain an advantage if they employ local labour, invest in domestic facilities, or maintain UK-based supply chains. The reforms are presented as part of a broader industrial strategy intended to reimpose sovereignty over key supply chains and stimulate jobs across the defence and maritime sectors.

Prospect, the union representing a range of skilled professionals in defence and public services, has welcomed the announcement. The union views the policy shift as essential to safeguarding skilled jobs in British industry and ensuring that investment in national defence yields local economic dividends. Prospect’s support adds momentum to expectations that the Government will embed “buy British” principles in defence procurement rules, particularly for major naval programmes.

For prime contractors and sub-suppliers in the UK defence industrial base, the announcement flags significant opportunity. Shipbuilders and naval systems integrators could find themselves positioned more favourably in future tender evaluations, particularly if they can demonstrate local content, domestic manufacturing, or reinvestment in UK facilities. Fabricators, steel processors, and specialist metal component makers may also see increased demand if procurement rules mandate preferential treatment for UK steel.

Implementation of these changes is likely to require revision of tender evaluation frameworks, stricter domestic content requirements, and new incentives or disincentives built into contract terms. Defence supply chain firms should prepare to review their localisation strategies, confirm their supply chain traceability, and document the UK sourcing credentials of their offerings. Early engagement in upcoming consultations or market engagement sessions – particularly ahead of major ship or submarine programmes – will likely prove valuable.

This shift aligns with other signals from government that defence procurement is being reframed as an engine for regional industrial reinvestment and sovereign capability. In July, the Defence & Economic Growth Taskforce published recommendations to reform procurement and contracting processes to benefit regional industrial sectors, including establishing a “Team UK” approach to better coordinate government and industry.

As the Ministry of Defence and Treasury work to embed these new procurement principles, defence suppliers should closely monitor policy consultations, draft procurement criteria, and emerging tenders – especially in naval shipbuilding, marine systems, and associated steel-intensive sectors. Those with established UK manufacturing presence or plans for investment in domestic capacity are well-placed to benefit from this strategic shift.

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