One UK bank wants a fast lane for military tech startups
Key Points
- Barclays wants a permanent fast-track procurement route for defence tech startups
- The bank said small firms struggle with MoD procurement and scale-up finance
- UKDI has a ring-fenced budget of at least £400 million a year
- The MoD aims to spend £7.5 billion directly with SMEs by May 2028
- Barclays also wants guarantees to improve working capital access for small firms
Barclays wants a permanent fast-track route for UK defence tech startups to win MoD contracts.
The bank set out the proposal in a report titled “Defence Tech: Building the pathways from innovation to scale”, which it published on 14 September.
Barclays said the UK generates plenty of defence innovation but struggles to turn it into adoption, scaled procurement and investable growth.
The bank called on the MoD and UK Defence Innovation (UKDI) to set up a permanent Defence Technology Accelerated Procurement Pathway.
It said this should give firms clearer progression from testing into mainstream capability programmes, along with better SME access to contracts.
Barclays also wants MoD payment practices that better support cash flow through the defence supply chain.
“The challenge is now ensuring that innovative companies can successfully move from development to adoption and commercial scale,” said Matt Hammerstein, CEO of Barclays UK Corporate Bank.
The report said small firms find defence procurement difficult to navigate, while scale-up finance and working capital remain hard to access at key growth stages.
The government has already launched several schemes aimed at small defence suppliers in recent years.
UKDI has a ring-fenced budget of at least £400 million a year and a mandate to spend more on AI, autonomous systems and drones through faster contracting.
The MoD also set up the Defence Office for Small Business Growth as a single front door for smaller firms.
It has committed to raising its direct spending with SMEs to £7.5 billion by May 2028.
The MoD Defence Tech Scaler, meanwhile, aims to streamline contracting for software, data and AI firms.
Barclays said these measures represent real progress at the policy level, but the focus now needs to shift to delivery.
The bank also called for a Defence Finance and Investment Strategy linking government demand, procurement, banking, capital markets and private investment.
It wants the government to expand the National Security Strategic Investment Fund to close growth-stage funding gaps.
Barclays also proposed government guarantees to improve access to working capital for SMEs and mid-sized firms.
It recommended industry-wide due diligence guidance and better information-sharing between the MoD, defence firms and lenders.
European defence, security and resilience startups raised $8.7 billion in venture capital in 2025, according to the Nato Innovation Fund, with UK firms taking the largest share.
Barclays based its findings on its own data and on two surveys of UK business decision-makers carried out in late 2025 and July 2026.
