The UK’s defence and national security sectors are experiencing unprecedented growth, driven by a surge in venture capital investment that reached a record $5.2 billion in 2024. This nearly fivefold increase over six years reflects a seismic shift in investor sentiment, as geopolitical tensions—particularly the Russia-Ukraine war—have heightened demand for advanced defence technologies.
Historically, investors have steered clear of “kinetic” assets like weapons systems due to ethical and environmental, social, and governance (ESG) concerns. However, the Heligan Group report reveals a significant realignment. Capital is now flowing into dual-use technologies such as artificial intelligence, cybersecurity, autonomous systems, and quantum computing—areas that merge enterprise value with national security applications. “There is a realignment of ethical and ESG lines,” the report states, as investors increasingly view defence and security as essential to societal stability.
This shift has unlocked a surge in funding for defence startups, scale-ups, and emerging prime contractors. Between 2014 and 2024, the UK defence sector’s turnover grew by 64%, reaching £100 billion in revenues in 2024. The sector now employs 443,000 people across aerospace, defence, security, and space industries.
The UK and Germany have emerged as the top destinations for defence-related venture capital, with Germany overtaking the UK in 2024. France has also seen strong investment inflows. At the policy level, Europe has launched initiatives like NATO’s €1 billion Innovation Fund and the EU’s €8 billion European Defence Fund (2021-2027). Post-Brexit, the UK has continued to foster innovation through the National Security Strategic Investment Fund and the Defence and Security Accelerator, now coordinated by the newly established UK Defence Innovation organisation.
Public-private collaborations are playing a pivotal role in reducing investment risk while fostering long-term growth and innovation. A new UK-EU post-Brexit agreement also grants UK firms access to the EU’s €150 billion Security Action for Europe fund, further stabilising defence investments. Private equity (PE) and corporate investors are increasingly active, with large defence contractors reinvesting profits into R&D and acquiring innovative firms. The 2024 acquisition of SixWorks by IBM for $150 million exemplifies this trend.
“Rising geopolitical risks are prompting institutional investors to rethink long-standing restrictions around defence allocations,” said Matt Croker, Partner at Heligan Group. “With heightened threat levels, investors are starting to recognise defence as not only critical, but also an untapped and potentially lucrative part of the investment landscape.”
The UK government has pledged to raise defence spending to 2.5% of GDP by 2027, with the Ministry of Defence allocating at least 7% of its budget to R&D by 2030. This nearly doubles annual defence science spending to about £4 billion, reflecting broad confidence in defence technology. Government commitments, NATO and EU programmes, and growing private capital inflows are converging to accelerate innovation. The UK defence sector’s 31% turnover growth over the past decade underscores the pace of this transformation.