What's Happening?
The UK Ministry of Defence (MoD) has awarded contracts to non-UK companies that are 23.1% higher on average compared to those given to UK-based firms. Between July 2024 and June 2025, the MoD awarded 1,244 contracts valued at £17 billion to UK suppliers, while 174 contracts worth £3 billion were given to non-UK suppliers. The average contract value for non-UK companies was slightly over £17.2 million, compared to just over £13.6 million for UK-based companies. The MoD records contract awards based on the administrative address provided in the supplier’s tender, but actual delivery may be carried out by an international parent company. This trend highlights the reliance on overseas expertise, particularly in the land domain, while UK companies maintain capabilities in air and naval sectors.
Why It's Important?
The disparity in contract awards between UK and non-UK firms underscores challenges within the UK's defence industrial base, particularly in delivering complex items. This reliance on foreign expertise could weaken domestic capabilities, especially as the UK government aims to leverage the defence sector for economic growth. The intention to increase defence spending to 5% of GDP over a decade-long roadmap may further impact domestic suppliers if foreign firms continue to receive higher average contracts. This situation could affect job creation and inward investment, as the government seeks to use defence spending as a lever for economic growth.
What's Next?
The UK government plans to increase defence spending to 5% of GDP, which includes investments in infrastructure with potential defence benefits. This long-term strategy may shift the balance of contract awards, potentially favoring domestic suppliers if infrastructure investments bolster UK capabilities. However, the inclusion of non-military entities in overall defence spending could complicate budget allocations. Stakeholders in the UK defence industry may need to adapt to these changes, focusing on enhancing domestic capabilities to compete with international firms.
Beyond the Headlines
The reliance on non-UK firms for defence contracts raises questions about the sustainability of the UK's defence industrial base. Ethical considerations regarding national security and economic sovereignty may arise as foreign companies play a significant role in defence procurement. Long-term shifts in policy could influence the UK's strategic autonomy and its ability to independently develop and maintain defence capabilities.
