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Public procurement represents a significant lever for government, and the UK has huge purchasing power. The Government's National Security Strategy 2025 declares that we are entering a "new era of radical uncertainty" requiring a "major cultural shift" for the UK to respond effectively. Against this backdrop, the UK Government has signalled a clear shift in how public procurement in four critical sectors will be used to support national security and economic resilience, with new guidance from the Cabinet Office placing national security considerations at the heart of public procurement decision making. National security is no longer viewed purely through a defence lens, but as closely linked to economic stability, industrial capability and supply chain resilience.
Procurement Policy Note (PPN) 025, issued in June 2026 and in place with immediate effect, ushers in a more interventionist approach to using UK public procurement to protect national security, reflecting the Government's view that procurement should support resilience, secure supply chains and strategic capability, and not just deliver short-term commercial outcomes.
The new policy covers four sectors treated as critical to national security: shipbuilding, steel, artificial intelligence and energy infrastructure, each with a named Sector Lead. These are appointed by the Government's Chief Commercial Officer: the National Shipbuilding Office (Ministry of Defence) for shipbuilding; the Department for Business and Trade for steel; the Department for Science, Innovation and Technology for AI; and the Department of Energy Security and Net Zero for energy infrastructure. Each lead coordinates the procurement pipeline across government, supported by the Cabinet Office through peer-led reviews. The precise resourcing and operational structure around these roles is not yet fully detailed in the published guidance.
The PPN applies directly to central government departments, executive agencies and non-departmental public bodies, while private utilities and other contracting authorities are encouraged to consider the guidance where their procurements are relevant. Private utilities should strongly consider applying it in relevant energy infrastructure procurements, especially in high-value, complex or nationally important procurements.
In-scope bodies are asked to identify relevant procurements in their pipelines, engage early with the relevant Sector Lead, and consider whether the national security exemption in the Procurement Act 2023 ("the Act") is appropriate and justified. The guidance emphasises "early" engagement, which appears to mean at the planning and commercial strategy stage — before a procurement is launched - though the precise timing is not further defined.
The exemption may allow authorities to disapply the Act where necessary in the interests of national security, but exempted contracts remain subject to certain procurement obligations, including non-discrimination duties towards treaty state suppliers where applicable.
The guidance stresses that procurements in the four sectors are not automatically exempt; any use of the exemption must be assessed case by case and based on a clear national security rationale. It indicates that justification operates on a "sliding scale of risk" rather than as a binary test, and in-scope organisations will need to build an evidence base considering factors such as the criticality of the capability being procured, supply chain vulnerabilities, market concentration and dependency risks.
The guidance also explains that national security is broader than defence, potentially including economic security, public order, foreign relations and environmental security, and that value for money should take account of resilience, continuity, strategic dependency and market sustainability.
Annex A to the PPN gives sector-specific thresholds and categories, including steel procurements of £10 million or more or involving over 500 tonnes of steel, shipbuilding procurements over £1 million, specified AI procurements of £5 million or more, and defined energy infrastructure procurements.
In practical terms, PPN 025 tells public bodies to plan earlier, gather better evidence on supply-chain and market risks, seek legal advice on the application of the national security exemption where needed, record their reasoning, and ensure any national security-based procurement approach is consistent with relevant international trade agreements.
How the new guidance interfaces with the Procurement Act 2023
At the centre of the update is the need for a clearer framework for applying the national security exemption under the Procurement Act 2023.
The guidance confirms that contracting authorities may rely on this exemption where they determine that, in the interests of national security, a contract should not be subject to the provisions in the Act (or part of the Act). The Sector Leads' role at this stage appears primarily to be that of facilitator - providing strategic context, market insight and cross-government coordination - but the decision to apply the exemption rests with the contracting authority itself.
Importantly:
- the exemption is not automatic, even in sensitive sectors;
- it must be applied on a case-by-case basis; and
- authorities will need to evidence and justify their approach.
At the same time, contracting authorities need to assess national security risks posed by suppliers and supply chains across procurements, reinforcing a more structured approach to risk management.
What organisations should do now
The PPN is effective immediately. In practice, therefore, in-scope organisations should be taking steps now to align with it. Key priorities include:
- reviewing procurement pipelines to identify where national security considerations may apply;
- assessing supply chain resilience, including dependencies on overseas suppliers;
- engaging early with relevant government stakeholders, including sector leads where appropriate;
- preparing for increased justification requirements, particularly where exemptions may be used; and
- strengthening internal processes for assessing national security risk in procurement decisions.
What to watch as the policy develops
For the defence sector, this direction of travel aligns with wider efforts to prioritise domestic capability and strengthen supply chains in an increasingly uncertain geopolitical environment. Whilst the PPN applies to four sectors that are key to security rather than (strictly) defence, the impact of procurement in these sectors is also likely to be felt in areas of defence procurement where they overlap. Organisations that proactively respond to these changes are likely to be better placed as procurement expectations continue to evolve.
If your organisation is navigating developments in procurement in any of the four key sectors or the application of national security exemptions under the Procurement Act 2023, please contact Elizabeth Williams or Christopher Brennan to discuss how our Aviation, Aerospace & Defence team can support you.
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