UK allocates GBP2.2bn to defence
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Reeves ring-fences GBP400m for novel technologies within the MoD’s equipment budget.
UK Chancellor of the Exchequer, Rachel Reeves announced a GBP2.2 billion increase in defence spending, a new combined defence innovation agency, a Defence Growth Board, and protected funding for new technologies in her 26 March Spring Statement 2025.
The funding boost, which will take effect in the next financial year, will act as a “further downpayment on our plans to deliver 2.5% of GDP by 2027”, she said.
Notably, the Spring Statement reveals plans to establish a new UK Defence Innovation organisation by July with a ringfenced budget of GBP400 million from next month, which will increase in future years.
The new organisation aims to simplify and consolidate the current MoD structures for innovation while also improving engagement with smaller companies and startups.
In addition, the MoD from next year plans to allocate 10% of its equipment budget towards novel and dual-use technologies, including uncrewed and autonomous systems and AI-enabled capabilities.
This includes directed energy weapons, such as the DragonFire system, which the MoD revealed on social media would be deployed across more of the Royal Navy fleet, thanks to the new funds.
The MoD had not responded to DSEI at the time of publication regarding which ships will host the systems and how many will be delivered.
As part of her Spring Statement, the chancellor affirmed a need to “reform our broken defence procurement system, making it quicker, more agile and more streamlined, and giving small businesses across the UK better access to Ministry of Defence contracts”.
One way the government will do this is through what it calls a “segmented” procurement approach. It will aim to reduce the time it takes to contract major platforms from six years to two, get component upgrades down from three years to one, and enable the exploitation of new technologies through three-month cycles.
Another key component in the government’s plan to reform procurement is the appointment of a new National Armaments Director, with applications closing 14 April.
Reeves also established a new Defence Growth Board in partnership with Secretary of State for Defence John Healey. The panel will monitor return on investment in the interests of taxpayers, the MoD, and HM Treasury.
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