Starmer promised to spend big on defense but Britain’s arms industry is still waiting

LONDON — In the corridors of Whitehall, armies of officials are working out how best to spend billions of pounds earmarked for defense equipment.

However, they have yet to inform the people it concerns the most: Britain’s arms industry.

Many in the sector now fear that they’ve wasted their own money developing cutting-edge gear, as the government drags its feet on awarding contracts.

U.K. Prime Minister Keir Starmer’s Labour Party has made a lot of noise on defense since entering government last year, plundering the aid budget to get defense spending to reach 2.6 percent of GDP by 2027 and a promise of 3.5 percent by 2035. 

Alongside the funding boost, Starmer asked George Robertson, a Labour Party politician who is a former NATO secretary-general, to lead a major inquiry into how the U.K. would meet geopolitical threats, known as the Strategic Defence Review (SDR).

The SDR was well received across the defense industry and viewed as a statement of intent from the government to devote effort and resources to building up the sector, with an emphasis on resilience and innovation. 

Those good intentions were supposed to be followed by a series of complementary announcements — including a defense industrial strategy, the appointment of a new national armaments director, and a defense investment plan. 

The industrial strategy and armaments director both arrived late, while the defense investment plan is still missing in action. It is now expected after this week’s fall budget. 

Six months since the SDR, many in the industry complain that they haven’t received the certainty they need about where the British government — in many cases, their sole buyer —plans to invest. 

Business owners say this is limiting their ability to make long-term plans and risks skilled workers departing for other jobs. 

One representative of a mid-sized arms manufacturer — granted anonymity like others in this piece in order not to damage commercial prospects — said the problem was that the “big, bold” prescription of the SDR has given way to “repeated deferral, which always happens with delivery plans of this complexity.”

Innovating in the dark

The war in Ukraine has radically reshaped other countries’ understanding of what’s needed on the battlefield, and the SDR set out a clear expectation that innovation would be rewarded.

At September’s DSEI — an industry jamboree held in London — it was plain to see that private companies had stepped up to deliver prototypes for novel weaponry and other equipment, from modular robots that can deliver materiel to a battlefield and can also serve as stretchers, to AI that can read and predict threats on the ground in real time. 

Much of that research and development was done by companies drawing on their own budgets or taking out loans as they wait for news of any specific government contracts. 

For small suppliers in particular, the lag could prove existential. 

One small manufacturer based in England said: “We are ready to go; we have built factories that could start making equipment tomorrow. But we can’t until an order is placed.”

Armored vehicle maker Supacat has said that while its business is stable, suppliers will suffer without a predictable path ahead.

“This is about the wider industry and our partners in the supply chain that have been contributing,” Toby Cox, the company’s head of sales, told POLITICO. “Our assumption is we don’t get more [orders], some of these companies will have a downturn in their orders.”

Keeping production lines warm

Andrew Kinniburgh, defense director general of manufacturers association Make UK, echoed those concerns.

While the industry “warmly welcomed” the Defence Ministry’s commitment to boost SME spending, he said, “the MOD must give companies certainty of long-term demand signals and purchase orders, allowing businesses to make the private investments needed in people, capital, and infrastructure.”

Mike Armstrong, U.K. managing director of German defense firm Stark, which has recently opened a plant in Britain, added: “Giving the industry a clear view of future requirements is the fastest way to ensure the U.K. and its allies stay ahead.”

Even some bigger companies that deal with the government on components for aircraft and submarines have privately complained about putting money into research and development without knowing what the end result will be. 

An engineer working at one of Britain’s largest defense firms said: “We have multi-use items that could be for both military and civilian purposes, but cannot invest until we know what government strategy is. If it’s bad for us, it must be so hard for SMEs.”

The issue is not only one of investment, but also of skills. Supacat’s Cox said that keeping production lines warm matters because the workforce behind complex fabrications is fragile.

“The U.K. has a skill shortage, particularly around engineering fabrication. If we’ve got an employee in that sector, we absolutely don’t want to lose them in another sector,” he said. 

Not long to go

The Ministry of Defence said it appreciates the need for clarity.

Defence Minister Luke Pollard, speaking to POLITICO at DSEI, said:  “We need to move to war-fighting readiness, and the SDR gave industry a very clear direction of how an increasing defense budget will be spent on new technologies and looking after our people better.”

He argued there was “a neat synergy” between the “duty of government to keep the country safe and the first mission of this Labour government to grow the economy.”

An MOD spokesperson said the defense investment plan would “offer clear, long-term capability requirements that enable industry to plan and unlocking private investment.”

They pointed out that £250 million had already been allocated for “defense growth deals” alongside a £182 million skills package, and that the MOD had placed £31.7 billion in orders with U.K. industry in the last financial year.

A government official rejected claims that ministers were moving too slowly, pointing to Defence Secretary John Healey’s recent announcement on new munitions factories as exactly the kind of demand signal that industry is looking for. 

The director of a large U.K. defense producer said the signs from the government were “encouraging,” specifying that Chancellor Rachel Reeves, having agreed to more money for defense, “wants to see a return on investment.”

While most of the country will be braced for Reeves’s big moment on Wednesday when she announces the national budget, one sector will have to hold its breath a little longer.

Luke McGee contributed to this report.