The UK government is paving the way for small and growing businesses to enter the defence sector, backed by a substantial £7.5 billion investment. This initiative aims to harness British innovation and technology to bolster the capabilities of the UK Armed Forces.
At the heart of this initiative is a bespoke £20 million fund designed to offer accelerated contracts to small, innovative British startups. This fund is part of the government’s broader commitment to making Britain the best place to start and grow a defence business. The contracts will not only help accelerate new defence technology to the UK’s Armed Forces but also provide a foundation for these companies to raise private capital and expand more rapidly.
To access the fund, businesses must be fully or part UK-owned, ensuring that the investment directly benefits British innovators. The fund is part of the Ministry of Defence’s (MOD) commitment to spend an additional £2.5 billion through to May 2028, taking the total spend with small and medium enterprises (SMEs) to £7.5 billion.
Defence Secretary John Healey MP highlighted the importance of small businesses in the defence sector, stating, “I am determined to make Britain the best place in the world to start and grow a defence business, and our military the fastest innovating in NATO. Backed by our record sustained increase in defence spending, we are delivering good jobs and growth across the UK by opening up new routes into the defence sector, giving small British-based businesses the jumpstart they deserve.”
The initiative is driven by the requirements of the UK Armed Forces and is led by UK Defence Innovation (UKDI). UKDI will identify the best UK technology to exploit, focusing on areas such as AI, Machine Learning & data science, robotics & autonomy, and Enhanced Precision Weapons.
In addition to the £20 million fund, the government is introducing a new ‘Dragon’s Den’ style event for defence tech companies. This event aims to provide seed funding for new and novel ideas at an earlier stage of development, connecting companies to private financing through the MoD’s Defence Investors’ Advisory Group.
The Ministry of Defence has also introduced new “Lite” Enterprise Agreements to support software and AI companies by reducing commercial barriers. These agreements, announced last year, include companies like Adarga, Hadean, Oxford Dynamics, and WhiteSpace.
To further support SMEs, the MOD has launched the new Office of Small Business Growth. This office aims to make it easier for SMEs to navigate the MOD procurement system, breaking down barriers and opening new avenues for innovation.
This initiative is part of the UK’s Defence Industrial Strategy, which aims to back British jobs, British industry, and British innovators. By opening up new routes into the defence sector, the government is ensuring that aspiring British entrepreneurs can capture the benefits of the record sustained increase in defence spending.
The search for the UK’s next defence unicorn—a privately held startup valued at over US$1 billion—has officially begun. This initiative not only promises to strengthen the UK’s defence capabilities but also to foster a new generation of British defence leaders and innovators.