UK defence suppliers face investment drag as spending plan delay hits orders

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UK defence investment delay

Highlights

The nine-month delay in publishing the UK's Defence Investment Plan, due to a £28 billion funding gap, has caused a slowdown in Ministry of Defence contract awards and undermined supply chain confidence.
Cohort's total revenue rose 12% last year, but the UK’s share fell below 50% as firms increasingly target faster-growing defence markets in Germany, Poland, Nordics, and the Baltics.
Several UK start-ups have collapsed or shifted focus abroad due to contract uncertainty, while a £45 million strike weapon contract for Ukraine advanced rapidly with prototypes tested since February 2025.

Delayed plan squeezes procurement pipeline

As reported by Reuters, Prime Minister Keir Starmer is expected to publish the Defence Investment Plan on Tuesday after a nine-month delay linked to disagreements between defence and finance officials over how to address an estimated 28 billion pound funding gap. Industry groups and company executives say the prolonged wait has weakened confidence across the supply chain at a time when Britain is trying to prepare its armed forces for a higher threat environment tied to Russia.

Companies say Ministry of Defence contract awards have dried up during the delay, while even smaller procurement decisions are taking longer than usual. Shefali Sharma, chief executive of Oxford Dynamics, says the plan is needed to give private investors confidence to scale funding, and that its absence is already imposing costs on businesses.

ADS told Reuters that dozens of smaller firms have gone out of business or have shut their defence units to focus on other industries. Cohort chief executive Andrew Thomis says demand has been rising in markets such as Germany, Poland, the Nordics and Baltics over the past 18 months, while expected UK procurement has still not come through.

Overseas demand draws capital and jobs

Cohort says total revenue is expected to rise 12% in its last financial year, but the UK's share has fallen below 50%, down from 80% a few years earlier. That shift highlights how slower UK decision-making is coinciding with faster contract awards in other countries, hurting domestic production and redirecting expansion plans abroad.

Q5D, which automates the manufacture of wiring used in drones and other equipment, has won contracts with the U.S. Army but not in the UK, making the U.S. the more likely location for a new factory. Oxford Dynamics, which employs about 45 people and already has technology in use on Ministry of Defence infrastructure, says the delay is preventing it from moving ahead quickly because it still lacks clarity on the capabilities the ministry wants.

Some start-ups have already collapsed without a clear demand signal. Aeralis, which designed a modular jet it hoped could compete to replace Britain's Hawk trainer fleet, entered administration in May.

One area of demand that continues to hold up is Britain's support for Ukraine. Rob Merryweather, BAE Systems' group technology director, says support for Ukraine is driving innovation and readiness in areas including next-generation navigation systems, while a British project to develop a low-cost long-range strike weapon for Ukraine has advanced quickly since February 2025, with prototypes tested within months and three companies now working on a 45 million pound development contract.

In our earlier article on Starmer’s defence investment plan ahead of the NATO summit, we outlined his push to finalise a major defence spending increase and lock in a small set of big decisions in his final stretch in office. We also noted that Whitehall’s pre-handover constraints and the transition timetable risked slowing decision-making, leaving less clarity for industry and the next administration.

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