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The opening months of 2025 saw the Labour Government begin to shape a more assertive defence posture in response to both geopolitical tumult and the UK’s domestic challenges. Three major moments defined the emerging character and ambition of this new approach: a commitment to increase defence spending to 2.5% of GDP by 2027, structural reforms set out by Defence Secretary John Healey, and the Spring Statement, which threaded defence priorities through industrial and economic policy. Together, they offer a clear picture of a government that sees defence as a national mission to underpin sovereignty, security and industrial strength.
Sir Keir Starmer’s spending commitment, timed to coincide with his visit to Washington to meet President Trump, landed with significant international and domestic weight. The choice to fund the increase through a reduction in overseas aid reflects the fiscal squeeze and the Government’s pivot from soft to hard power in a more volatile global environment. Incorporating national security service spending into the Ministry of Defence's (MOD) budget also reflects the growing convergence between security and defence in operational terms.
John Healey’s intervention a fortnight later built on the Prime Minister’s announcement by addressing what many in the defence sector regard as the fundamental barrier to progress: the procurement system. A new warfighting readiness “quad”, comprised of four senior leaders, will now oversee investment, delivery and accountability. A new National Armaments Director (NAD) will be the principal point of contact for defence businesses, with responsibility for a newly established investment budget and an emphasis on delivery over process.
If Starmer and Healey offered the strategic direction and structural change, Rachel Reeves offered the economic trajectory. Several important measures in the Spring Statement signalled that national security and economic security are increasingly indistinguishable. First, is the cross-departmental Defence Industrial Capacity Review to identify supply chain gaps, export opportunities and industrial bottlenecks. Second, the announcement that capital allowances for full expensing would now explicitly apply to defence supply chain firms—a signal that investment will be incentivised. And third, the Sovereign Capabilities Skills Plan — due this autumn —to target skills gaps in defence, space and advanced manufacturing. Other proposals to extend R&D credits, and National Wealth Fund eligibility to defence-adjacent sectors, and initiatives around the Green Industrial Strategy reflect how Labour is framing defence spending not just in terms of threat but also in terms of growth, competitiveness and sovereign capability.
The Government’s change of approach is sending a powerful signal through the UK’s innovation and investment landscape that defence is no longer isolated from the tech economy but embedded within it. Small and medium-sized enterprises (SMEs) see this as a moment of generational significance: a chance to break into a market dominated by legacy players, supported by a government actively dismantling barriers to entry.
Investor interest in dual-use and defence-adjacent technologies has spiked, particularly in AI, aerospace components, autonomous systems and cybersecurity.
Large defence contractors are looking to reposition themselves as technology companies — recruiting AI specialists, exploring commercial cloud partnerships and accelerating their R&D pipelines to compete with faster, nimbler entrants.
Meanwhile, tech companies with no prior defence exposure are now taking meetings with MOD officials, hiring regulatory consultants and forming consortia to bid on long-cycle defence projects for the first time.
This convergence is creating a fertile environment for new forms of collaboration — and competition.
Those seeking to future-proof their business and align with long-term government priorities require a calibrated approach: doubling down on dual-use technologies that serve both national security and wider economic goals. Pursuing dual-use capability not only meets the government’s growing demand for sovereign and resilient supply chains but also speaks to the UK’s wider positioning as a science-driven, values-led economy. Technologies that enhance national security while supporting broader societal, environmental or economic goals will be at the heart of the UK’s strategic posture. Whether it’s advanced materials, AI, energy storage, maritime autonomy or aerospace innovation, the government is signalling that it values technologies that reinforce security, promote growth and can be exported to like-minded partners.
In a policy environment where departments from MOD to Treasury and Energy to Science, Innovation and Technology are increasingly interconnected, companies that can tell a story about how their technology supports UK prosperity, resilience and competitiveness are more likely to win contracts, secure political support and attract board-level buy-in.
From a commercial perspective, dual-use technologies face fewer regulatory and reputational hurdles and remain more resilient to shifts in government procurement priorities. They allow companies to ride the wave of increased defence investment without becoming entirely dependent on a single customer — particularly one as procedurally complex and politically exposed as the Ministry of Defence. Moreover, dual-use firms can participate in international programmes with greater ease, sidestepping some of the barriers posed by strict defence classification or national security exemptions. Dual-use strategies also offer more dependable cash flow, a larger addressable market and greater long-term investor appeal. For investors, this dual-track strategy presents a compelling offer: defensible revenue from public sector demand and scalable upside from commercial applications.
As the global landscape becomes more unpredictable and the UK carves out its post-Brexit identity, firms that can innovate within this dual-use space will be the ones best placed to deliver value to shareholders, support national objectives and shape the next generation of transatlantic industrial partnerships.
The current mood within the defence and tech sectors is understandably buoyant. For the first time in over a decade, government spending, policy focus and industrial incentives are converging around defence as a growth sector. However, companies would be wise to pair ambition with caution. It is tempting, particularly for new entrants or rapidly scaling SMEs, to go all-in on defence. The more strategic move — especially in the UK context — is to develop technologies that are equally applicable in civilian and defence markets.
It is important to remember that the current phase of policy is shaped by a rhetoric of escalation on Ukraine, Gaza and, increasingly, on transatlantic relations. Yet that rhetorical high pitch will not necessarily endure. In the medium term, the UK will need to navigate a path that reflects both its values and its structural realities: outside the EU, uncertain of its leverage with the US, dependent on increasingly transactional alliances. In that context, it is not enough for the UK to be seen as a defence-heavy actor. It must also be perceived as a force for stability, scientific leadership and global standards-setting. Businesses should keep this front of mind.
The Prime Minister’s pledge, the Defence Secretary’s reforms, and the Chancellor’s Statement mark a shift in how defence is positioned within government. No longer the preserve of a single department, it is now an economic lever, a workforce development priority and an industrial strategy. For firms in the sector, the opportunities are considerable: increased spending, clearer points of contact and new incentives for R&D and capital investment. But the bar is also rising for expectations on delivery, value for money and strategic alignment. Defence is no longer a standalone policy area; it is central to the Government’s core mission. And companies which understand that will be far better placed to endure whatever the international landscape looks like in 2026 and beyond.
This blog was written by Director James Clark, James leads Flint Global’s Defence Advisory Practice, supporting clients on defence policy, procurement strategies, and stakeholder engagement. His expertise includes providing strategic guidance to defence companies and investors and helping them to navigate complex defence and security risks. For further strategic advice across the sectors described above, don’t hesitate to contact the team at Flint.
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