The UK has taken a significant step towards opening its defence sector to greater private investment, aiming to accelerate military readiness, boost innovation, and position defence as a key engine for economic growth and job creation.
In a statement on Wednesday (22 April), Defence Secretary John Healey and Chancellor Rachel Reeves met with leaders from UK banking, venture capital, and strategic finance through the Defence Investors’ Advisory Group (DIAG).
The meeting focused on exploring how private capital can be leveraged to strengthen Britain’s defence capabilities in an increasingly uncertain global security environment.
The government has also launched a rapid review process to examine structures for attracting private investment into defence projects.
“As part of this, we are exploring how private investment can be leveraged to help build the defence capability Britain needs , creating jobs, making defence an engine for growth and making every pound go further,” said Defence Secretary John Healey.
Chancellor Rachel Reeves added that national security remains the government’s top priority, and leveraging private sector investment and expertise is essential in today’s world.
The UK has committed to increase defence spending to 2.5% of GDP by 2027, with ambitions to reach 3% in the next Parliament.
While public funding is rising at the fastest sustained rate since the Cold War, officials recognise that government budgets alone cannot close capability gaps quickly enough, particularly in areas such as advanced technology, munitions production, digital transformation, and supply chain resilience.
Private investment is seen as a way to ‘crowd in’ additional capital, speed up innovation cycles, and support both prime contractors and small-to-medium enterprises.
The government has also launched a bespoke £20 million fund to offer accelerated contracts to small, innovative British startups with limited or no previous business with MOD – as the search for the UK’s next defence unicorn gets under way.
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