More than half of UK businesses expect to benefit from increased government investment in defence, according to new research from the Barclays Business Prosperity Index. The survey, which included 1,000 business leaders across various sectors and regions, found that 74 percent support the government's plan to raise defence spending to five percent of GDP by 2035.
Sixty percent of respondents believe that government investment in defence could create economic opportunities within their sector. Fifty-one percent expect increased defence spending will have a positive impact on their own business, while 56 percent anticipate benefits for their region.
The study also found that nearly one-quarter of businesses have participated in defence contracts or supply chains once, with 17 percent involved multiple times. Twenty-five percent expressed interest in future opportunities despite having no prior involvement.
Among those expecting a positive impact from higher defence spending, 56 percent identified increased research and development in new technologies as the main benefit. Half pointed to the creation of new contracts and local supply chain opportunities, while 53 percent cited improved skills and workforce development.
Fifty-one percent believe that greater defence investment will attract new partnerships or investments to their region. Forty percent think it will support growth among small and medium-sized enterprises (SMEs), foster innovation, and create jobs locally.
Despite this optimism, many businesses see challenges entering the sector. Thirty-two percent called for simpler regulatory requirements such as compliance reporting; thirty-three percent want clearer procurement guidance; and thirty percent would like a trusted supplier white list to streamline due diligence processes.
Views on environmental, social and governance (ESG) risks related to working with the defence sector are mixed. Forty-five percent reported increased caution about ESG risks, while twenty percent said they had fewer concerns compared to before. Thirty-two percent noted no change in attitude. A similar pattern was seen among customers: forty-three percent indicated more ESG caution but twenty-one saw growing openness toward the sector.
Overall sentiment towards working with the defence industry has become more positive for over half (53%) of respondents during the past year; only three percent said they felt more negative.
Business leaders are calling for further support measures: thirty-four percent seek better access to sector-specific skills and training; another third want greater transparency around ESG expectations; and an equal share request financial incentives or support schemes. Thirty-eight percent say a Defence Guarantee Scheme—where government offers financial guarantees for capital and investment—would encourage them to join supply chains.
The findings from this research will be discussed at the Department for Business and Trade’s Global Space Finance Summit on December 10th, which brings together policymakers including Lord Stockwood, Minister for Investment, along with experts from across the sector.
Matt Hammerstein, CEO of Barclays UK Corporate Bank said: “Our research shows that businesses are increasingly interested in supporting the defence sector, with many ready to innovate and enter supply chains.
“To unlock the full potential of defence-driven growth, we urge the Government to sustain momentum on defence investment by streamlining export and compliance regulations and providing targeted support such as a Defence Guarantee Scheme. These steps will help more UK businesses seize the opportunities presented by increased defence investment.
“At Barclays, we’re committed to supporting the sector and helping firms unlock new opportunities to drive innovation and growth across the UK, whilst providing a range of financial products and services to UK, US and European defence companies that supply NATO and its allies.”
Abdul Qureshi, Managing Director of Barclays Business Banking said: “Increased defence spending presents a significant opportunity for SMEs to innovate and grow, particularly those in frontier tech.
“Many high potential start ups and scale ups are eager to participate with corporates and enter the supply chain – and these businesses have a vital role in driving regional growth. We’re committed to helping businesses seize new opportunities and support their investment plans through tailored solutions and the Business Prosperity Fund.”
Barclays is offering its Business Prosperity Fund—which provides lending options for both existing clients as well as new applicants—to help companies invest in growth projects throughout 2025. The bank has £22 billion available for lending through its Business Banking division as well as UK Corporate Banking clients next year.