Recommendation 6

The ever-increasing cost of the Defence Nuclear Enterprise (the DNE) is likely to add pressure on the Department’s overall budgets. In 2024–25 the nuclear budget was £10.9 billion, around 18% of the whole defence budget (unchanged as a percentage from 2023–24 figures). The Department has sought to ensure that it manages the DNE budget effectively and efficiently, and is exploring opportunities to include more British small and medium-sized enterprises in its supply chain. However, costs are rising through a combination of the Department trying to speed up the work schedule and adding new programmes to it, and inflation. In consequence, forecast costs for the DNE for the ten years beginning 2023–24 have increased by around £10 billion from £117.8 billion (to approximately £128billion). Yet in 2023, the DNE’s ten-year costs were already £7.9 billion more than budget. The government has created a ringfence which prevents the Department from using elsewhere money allocated to the DNE, but which allows money to flow the other way. The Department has not yet worked through the implications of the SDR on the balance of investment between the DNE and conventional capabilities. However, increasing nuclear costs may restrict the money available for conventional equipment and other important requirements, such as improving poor accommodation which is crucial in addressing the military’s recruitment and retention problems. recommendation The Department’s annual update to Parliament on the DNE should provide details of its planned costs, including: • the proportion of the defence budget this comprises; • an explanation of any variances from the previous year’s plan; and • budgets moving between years or from the wider defence budget into the DNE ringfence. 7 1 Responding to lessons learned from the UK’s military support for Ukraine Introduction