- in United Kingdom
- with readers working within the Retail & Leisure and Telecomms industries
- within Compliance topic(s)
- with Senior Company Executives, HR and Inhouse Counsel
The UK Government published its Defence Industrial Strategy 2025: Making Defence an Engine for Growth on 8 September 2025. This strategy marks a transformative shift in national security policy - positioning defence not only as protection but as a catalyst for economic growth and innovation. For organisations operating in the defence sector, this evolution presents both opportunity and obligation.
As the UK's defence strategy adapts to meet the demands of a rapidly changing global landscape, businesses must be ready to respond. This insight explores the implications of the Defence Industrial Strategy 2025, highlighting what's changing, why it matters and what organisations need to do to remain competitive, compliant and resilient.
Defence Industrial Strategy: key takeaways and how it impacts your organisation
1. Innovation at wartime pace
A defining feature of the strategy is the ambition of the UK Ministry of Defence (MoD) to innovate at "wartime pace", a commitment to accelerating the development and deployment of advanced technologies across defence operations.
This shift is driving:
- Improved procurement cycles that favour agility and responsiveness over lengthy specifications.
- Increased investment in AI-driven defence systems, autonomous platforms, space and digital targeting capabilities, backed by the new UK Defence Innovation (UKDI) and its ringfenced budget of £400 million.
- Emerging technological advancements, with the MoD's research and development budget expected to exceed £2 billion in 2026/27 (and rising each year after), and committing to spend at least 10% of its annual equipment budget on novel technologies.
- A push for dual-use technologies that can serve both military and civilian applications, underpinned by enhanced support initiatives such as the launch of NATO DIANA. At Gowling WLG, we are proud to play a leading role in the DIANA Legal Connect Network, advising innovative dual-use start-ups and scale-ups.
These developments introduce new layers of complexity for organisations involved in defence supply chains, technology development and cross-border collaboration.
What organisations need to do:
- Ensure that emerging technologies, particularly AI and autonomous systems, are developed and deployed in compliance with international law, including export controls and cybersecurity regulations.
- Consider the ethical implications of autonomous platforms and AI decision-making in defence contexts and embed responsible innovation principles into product design and governance.
- Integrate robust intellectual property protection and strategy for emerging technologies and innovation.
- Review cross-border operations and partnerships to ensure data protection, sovereignty and national security requirements are met.
- Assess internal governance models and risk frameworks to ensure they are equipped to handle the pace and sensitivity of defence innovation.
Organisations must be prepared to operate in an environment where technological advancement is not only rapid but strategically critical requiring foresight, adaptability and robust internal controls.
2. Procurement reform
Procurement reform is a key pillar of the modernised approach, reflecting a shift from transactional purchasing to strategic acquisition that aims to reduce bureaucracy, and supports national resilience, innovation and industrial growth.
Key changes include:
- Outcome-based procurement: Contracts are increasingly focused on delivering capability and value over time, rather than rigid specifications. This allows for greater flexibility and responsiveness to evolving defence needs.
- Single source contracts: The proposed overhaul of the Single Source Contract Regulations (SSCR) framework targets a more competitive, productive and efficient procurement system. Refinement of the current regime, which governs many of the UK's largest and most strategically vital defence procurements, seeks to ensure appropriate incentive alignment, access for SMEs, and a drive for innovation, productivity, pace and simplification.
- Five-year acquisition pipeline: The MoD has published a forward-looking procurement schedule, providing industries clearer visibility of upcoming opportunities and enabling better planning and investment.
- Segmented procurement strategy: Defence procurement is now categorised by risk, complexity, and strategic importance, allowing tailored approaches for different types of goods and services.
- SME access and scaling: The strategy sets a target to increase MoD spending with small and medium-sized enterprises (SMEs) by £2.5 billion by 2028, supported by a new National Armaments Director, Defence Office for Small Business Growth, SME Commercial Pathway, and a new UK offsets regime, streamlining access for start-ups, scale-ups and small businesses.
- Unified defence exports: Defence exports will now be managed under one ministerial department via the new Office of Defence Exports, supporting government-to-government deals and export licensing.
- Digital acquisition tools: Procurement processes are being modernised through digital platforms that streamline decision-making and improve transparency.
What organisations need to do:
- Be open to embrace new contract models and to adapt risk management policies in line with MoD's evolving contracting requirements.
- Align bid strategies with MoD segmentation criteria and long-term capability goals – understand the evolving nature of MoD's requirements.
- Prepare for increased competition and scrutiny in procurement processes.
- Ensure readiness to meet onboarding and compliance requirements on defence programmes, particularly for SMEs entering defence supply chains.
- Monitor developments in the UK offsets regime and digital procurement platforms to remain competitive.
3. Defence as a strategic growth sector
The Defence Industrial Strategy positions defence as a key contributor to national economic growth, with spending set to rise to 2.6% of GDP by 2027, 3% in the next Parliament and a target of 5% by 2035 - its largest sustained increase since the Cold War.
Growth priorities include:
- The 10-year Defence Investment Plan to guide long-term funding and capability development.
- Expansion of public-private partnerships, particularly in research & development, infrastructure and advanced manufacturing.
- Emphasis on sovereign capability, encouraging UK-based innovation and production.
- A "triple-lock" commitment to nuclear deterrence capabilities, with the Defence Nuclear Enterprise seeing £15 billion invested in the sovereign warhead programme, and expansion of submarine capacity.
- Forging new partnerships through cross-border collaboration to unlock international opportunities, such as the UK's recent warship export agreement with Norway1, the multibillion-pound deal to sell Typhoon jets to Turkey (on which Gowling WLG advised)2, and the further strengthening of the UK-US partnership.
- A £6 billion investment into munitions and new factories to reinforce the supply chain.
What organisations need to do:
- Explore opportunities to participate in long-term investment programmes and collaborative innovation projects.
- Structure partnerships and joint ventures to align with the MoD's strategic defence priorities and develop new partnerships to respond to MoD's drive for innovation.
- Ensure compliance with national security regulations, export controls, and international collaboration frameworks.
- Position themselves to contribute to sovereign capability goals through UK-based operations and innovation.
Practical steps for defence sector readiness
To remain resilient and aligned with the UK's evolving defence strategy, organisations should consider the following actions:
- Be prepared to adapt contracts to reflect outcome-based procurement models and new compliance standards.
- Assess legal and operational risks associated with emerging technologies, particularly AI and autonomous systems and have clear risk policies to manage risk.
- Strengthen data governance and cybersecurity protocols to meet defence sector expectations and regulatory requirements.
- Ensure readiness for cross-border partnerships, including export controls and international collaboration frameworks.
- Stay informed on policy developments by monitoring legislative updates and participating in relevant industry briefings.
These steps will help organisations position themselves to engage effectively with defence sector opportunities while managing risk in a rapidly changing environment.
Footnotes
1 https://www.ft.com/content/23160153-fc98-46ab-8d7b-8ed3fa85952c
Read the original article on GowlingWLG.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
