United Kingdom, through the Ministry of Defence has moved to explore new ways of leveraging private sector investment to strengthen Britain’s defence capabilities, as part of a wider strategy to accelerate innovation, deepen industry-government cooperation, and drive long-term economic growth.
The Ministry of Defence has also confirmed plans to place the Defence Investors’ Advisory Group (DIAG) on a permanent footing and expand its remit. The move is intended to strengthen long-term collaboration between government and the financial sector at a time of rising global security pressures and accelerating technological change in warfare and defence systems.
According to the Defence Secretary John Healey, a strong UK economy needs strong UK defence.
“The Chancellor and I are determined to bring together investors in a new partnership that delivers for our security, for our economy and for hard-working families up and down the country.
“As part of this, we are exploring how private investment can be leveraged to help build the defence capability Britain needs – creating jobs, making defence an engine for growth and making every pound go further.”
John Healey
A key component of the reform is the establishment of a new Defence Finance Zig-Zag secondment scheme, which will embed private-sector personnel within the Ministry of Defence. According to the government, the program is intended to bring commercial experience directly into government decision-making, boosting defence financing efficiency and modernising procurement and investment practices.
The government clarified that these changes are a reflection of an evolving global environment where national and economic security are becoming more intertwined. It also believes that modern capacity development depends more and more on the ability to draw in private investment and apply financial innovation to defence technology and infrastructure, in addition to public spending.
Chancellor Rachel Reeves indicated that national security is the government’s first responsibility, and in an increasingly uncertain world, “we must explore how we can leverage private sector investment and expertise to keep the country safe.”
“The announcement comes alongside plans for the largest sustained increase in defence spending since the end of the Cold War, with investment set to reach 2.6% of GDP from 2027. Ministers say this increase will provide the financial foundation for long-term transformation across the defence sector.”
Rachel Reeves
Government Deepens Defence-Finance Partnership to Unlock Innovation and Investment
The reforms form part of a broader effort to modernise the UK’s defence-industrial strategy and expand access to private capital. The Treasury and UK Government Investments will collaborate with the Ministry of Defence to determine how private investment may be more efficiently used to assist innovation, infrastructure development, and industrial growth within the defence ecosystem.
In recent months, the government has increased its engagement with the investment community, including high-level meetings between defence officials and venture capital firms, as well as “pitch-style” investor events at which emerging British defence companies present their innovations directly to potential investors. These efforts aim to increase early-stage enterprises’ access to financing and hasten the adoption of novel defensive technologies.
In addition, a £20 million special fund has been established to assist creative UK defence entrepreneurs, offering expedited contractual pathways to businesses with little to no prior experience dealing with the Ministry of Defence. The program aims to boost the local innovation pipeline while identifying and assisting the next generation of British defence technology leaders.
Cathal Deasy, Global Co-Head of Investment Banking at Barclays and a member of the Defence Investors’ Advisory Group, indicated that, “these steps are about building the right long-term framework for partnership between defence, industry, and finance.”
“Clearer priorities, better engagement routes, and more modern delivery models will help attract private capital at scale, support innovators and supply chains, and strengthen resilience across the UK.”
Cathal Deasy
He further stated that investor appetite for UK defence opportunities is growing, particularly where government priorities are clearly defined and supported by stable long-term policy direction, adding that the new framework will help modernise defence capability, including infrastructure, energy systems, and supply chains, while improving resilience in an increasingly contested global environment.
According to the Ministry of Defence, these initiatives are also intended to ensure that defence spending yields broader economic benefits, such as job creation, regional investment, and sector revitalisation. The government believe that combining public and private investment will help the UK establish a more creative and dynamic military business.
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