The UK defence industry is set to benefit as the Government explores new ways to unlock private investment to strengthen military readiness, drive innovation and deliver economic growth across the country.
The Ministry of Defence will examine how private capital can be more effectively leveraged during a meeting of the Defence Investors’ Advisory Group (DIAG), which brings together senior figures from UK banking, venture capital and strategic finance to advise ministers on defence investment priorities.
The Defence Secretary has also announced that DIAG will be placed on a permanent footing and expanded, deepening collaboration between government and the UK’s world‑leading financial services sector.
As part of this enhanced partnership, industry professionals will join the MOD through a new Defence Finance “Zig‑Zag” secondment programme, embedding private‑sector expertise directly into defence decision‑making and financial planning.
The programme is designed to ensure the MOD can draw on cutting‑edge investment knowledge as it accelerates defence capability and supports growth in the sector.
The announcements come alongside the largest sustained increase in defence spending since the end of the Cold War, with UK defence spend set to rise to 2.6% of GDP from 2027.
Ministers say the increased budget provides both the scale and certainty needed to attract long‑term private investment into defence‑related innovation, manufacturing and infrastructure.
HM Treasury and UK Government Investments will support the MOD’s initial “sprint” to identify where private capital can most effectively be used to stimulate innovation and growth across the defence supply chain.
The work builds on wider government efforts to reshape the relationship between defence and the private sector, removing obstacles that have historically limited private investment in defence technologies.
Recent initiatives include a first‑of‑its‑kind meeting between the Defence Secretary and venture capital firms, as well as a Dragon’s Den‑style pitching event that allowed pioneering defence companies to present innovations directly to major investors.
These initiatives are designed to create clearer routes to funding for emerging technologies, from advanced manufacturing to next‑generation defence systems.
The Government has also launched a bespoke £20 million defence innovation fund, offering accelerated contracts to small, innovative British start‑ups that have limited or no prior business with the MOD.
The fund is intended to help promising firms scale quickly, test new capabilities and attract follow‑on private investment, as the search begins for the UK’s next defence “unicorn”.
John Healey, Defence Secretary, said:
“In a more dangerous world, our national security is the guarantor of our economic security and investment confidence. A strong UK economy needs strong UK defence.
“The Chancellor and I are determined to bring together investors in a new partnership that delivers for our security, for our economy and for hard-working families up and down the country.
“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.”
By unlocking private investment alongside increased public spending, the Government aims to:
- Strengthen military readiness
- Support high‑skilled jobs across the UK
- Grow the domestic defence industrial base
- Accelerate the development of innovative technologies
The expansion of DIAG and closer engagement with investors signals a shift towards a more open, partnership‑driven approach to defence capability.
With increased budgets, targeted funding for start‑ups and embedded private‑sector expertise, officials believe the UK defence industry is well placed to enter a new phase of sustainable growth and innovation.
Image credit: iStock
