Source · Select Committees · Defence Committee
Recommendation 25
25
Accepted
Access to finance for defence industry is a significant and complex issue with delayed solutions.
Conclusion
Access to finance for defence industry is a significant issue as evidenced by the numerous publications and policy proposals from this year alone. We are frustrated that, given widespread recognition of the issue, no proposed solutions are likely to emerge before March 2026, with implementation likely to take much longer. The wider issues which face defence financing appear to be both myriad and complex. But Government ought to be able to identify which of these problems are specific to defence industry as opposed to resulting from wider systemic failings. (Conclusion, Paragraph 99)
Government Response Summary
The government will publish the Defence Finance and Investment Strategy (DFIS) in Spring 2026 to address finance issues, and will launch the Defence Office for Small Business Growth (OfSBG) in January 2026 to help smaller defence businesses access tailored financial products and services.
Government Response
Accepted
HM Government
Accepted
The Defence Finance and Investment Strategy (DFIS) will be the first comprehensive MOD strategy focused on defence finance and investment, in recognition of the issues faced in the industry. The DFIS will be published in Spring 2026. However, significant work is underway on reducing barriers to finance in the defence industry, including through monthly meetings of the Defence Investors’ Advisory Group (DIAG), the expert committee advising on the development of the DFIS. With the move to warfighting readiness, pace is a key consideration; the DFIS is exploring long-term solutions as well as short-term opportunities to mobilise private finance into UK defence, such as through public private finance models. The Department is engaging across the finance and investment ecosystem to do so. This includes engagements with public financial institutions, private investors, and international partners, with a focus on improving access to capital for the defence industry and drawing capital into defence projects. Setting clear demand signals is key for unlocking defence financing. Moreover, the Office for Small Business Growth will be established ahead of March 2026, as committed to in the Defence Industrial Strategy, and will consist of a new ‘Front door’ web presence with a clear proposition and guidance for SMEs. The remit of this Office includes supporting SMEs with access to finance. The Department continues to back business and innovation with funding through UKDI, and partnerships with other public organisations, such as Innovate UK, to deliver growth and capability into the hand of the war fighter. Harnessing the potential of start-ups and Small and Medium Enterprises (SMEs) is also vital to our ambitions to grow a better more integrated, innovative, and resilient defence sector. However, it is recognised that smaller defence suppliers can face long-standing issues in accessing finance. As part of the MOD’s commitment to removing unnecessary barriers to SME participation in our supply-chain, the Defence Office for Small Business Growth (OfSBG) will support smaller businesses in accessing tailored financial products and services, ensuring they are better positioned to contribute to the growth and resilience of the defence sector. The Office will be launched in January 2026 and will develop its offering as part of the Defence Finance and Investment Strategy, reflecting our determination to support SMEs and strengthen the UK’s world-leading defence industry.