Committee publication · Correspondence · 8 September 2025
Letter from the Secretaries of State for Business and Trade and for Defence relating to the Defence Industrial Strategy, 4 September 2025
From: Business and Trade Committee
Inquiry: Industrial Strategy
Summary
The Secretaries of State for Defence and Business & Trade respond to the Business and Trade Committee's recommendations on the Modern Industrial Strategy, confirming government support for using defence as an economic growth driver. They outline specific commitments including £400m for defence innovation, £2.5bn additional SME spending by 2028, procurement reforms with new timescales, creation of a National Armaments Director role, and establishment of Defence Growth Deals and a Defence Industrial Joint Council.
Key findings
- Government commits at least 10% of MOD equipment budget to novel technologies and £400m to UK Defence Innovation for fast-track commercialisation
- Defence SME spending to increase by £2.5bn (50% rise) to reach £7.5bn total by May 2028, supported by new SME Support Centre
- Procurement reforms will segment contracts: major modular platforms within 2 years, spiral/modular upgrades within 1 year, rapid commercial exploitation within 3 months
- New National Armaments Director role created to control procurement levers and oversee end-to-end acquisition, breaking down barriers between military services
- £3bn UK Export Finance lending for defence exports announced alongside new Office for Defence Exports to develop Government-to-Government framework
Tone
SupportiveTopics
Key actors
Liam Byrne, John Healey, Jonathan Reynolds, Chancellor of the Exchequer, Defence Industrial Joint Council, National Armaments Director
Notable line
“… defence plays a vital role as an 'engine for growth' as we maximise the economic benefits of defence spending while responding to the rapidly deteriorating security landscape.”
Key Quotes
“We strongly support the priorities outlined in your letter. Defence is one of the Industrial Strategy's eight growth-driving sectors …”
“… we are committing at least 10% of the MOD's equipment budget towards novel technologies and have dedicated £400 million to the newly launched UK Defence Innovation …”
“We will implement a new, segmented approach to procurement: contracting for major modular platforms within two years; pace-setting spiral and modular upgrades within a year; and rapid commercial exploitation within three months.”
“The NAD Group will break down barriers between military services and create stronger partnerships with the private sector to drive UK prosperity.”
“We will also prioritise and increase defence exports to drive growth and resilience of the sector.”
Source · parliament.uk record ↗