The UK government has announced that it will provide SMEs with more funding for defence-related exports.
The new funding, which follows the government's announcement that it’s boosting defence spending to 2.5%, will “create a secure and stable environment in which businesses can thrive, supporting the government’s number one mission to deliver economic growth,” as well as meeting its objectives on national security, it says. It means up to 12,000 small businesses will receive additional financial support.
SME support ‘hub’
The government is also establishing a new hub to provide SMEs with “better access to the defence supply chain”, which will help “small, often family-owned, firms to bring their innovations, their agility and their expert workforce to the task of strengthening Britain’s defences”.
The hub aims to ensure the boost in spending goes directly to SMEs, helping them to train their workers and to raise finance, the government argues. While 70% of spending in defence goes to businesses located beyond London and the South East, it adds, only 4% of that spending goes to SMEs, according to statistics from 2023–24.
The new hub “will strengthen defence procurement through increased choice and faster access to innovation”, while also “growing potential exports benefits”.
‘Boost economic growth’
Prime minister Sir Keir Starmer said that “increasing our investment in defence is not only bolstering our national security, it is an opportunity to put more money into working people’s pockets and boost economic growth”.
“By helping smaller businesses to access this money, we’re making communities across the UK better off and opening up more opportunities to train for good, skilled, productive jobs.”
Defence secretary John Healey, meanwhile, said that “for too long small businesses felt locked out of defence, but we’ve listened and we’re acting”. The new announcements will also draw new suppliers into the sector and accelerate the development of new technology, he said.
Defence spending increase
The extra support for SMEs follows the prime minister’s announcement last week that he would boost UK defence spending to 2.5% of GDP by 2027.
This is to be funded by a reduction of 0.2% in the country’s aid budget, as reported by the BBC.
The UK’s FTSE 100 stock index hit a record high yesterday (3 March) as British arms firm BAE Systems’ stock price rose 17.5% to its highest ever level, according to Sky News. Rolls-Royce Holdings, another defence firm, enjoyed a 6% rise.
In Europe, meanwhile, market anticipation for increased defence spending has seen stocks like Germany’s Rheinmetall and Italy’s Leonardo increase in value by 18% and 15% respectively.
