Getting Defensive – the spending review

Rachel Reeves MP, Chancellor of the Exchequer, announced the Comprehensive Spending Review (CSR) to the Houses of Parliament on Wednesday 11^th June.

The CSR outlines budgets set out for governmental departments, from the Home Office to Department of Health, and covers spending and capital investment for over the next four to five years.

In her Commons address, the Chancellor stated from the outset that the latest economic figures show that the UK is the fastest growing economy in the G7. She spoke further on how the latest trade deals with India, the US, and the EU were supporting this trajectory.

The volatile global landscape, which has been marked by conflicts in Ukraine and beyond, is forcing the hand of defence prioritisation. The sector is likely to contribute to economic growth that will be underpinned by the recent Strategic Defence Review.

As outlined in the CSR, the Strategic Defence Review (SDR) ensures the UK’s outlook to defence and deterrence with a focus on:

• moving to warfighting readiness,
• adopting a ‘NATO First’ approach,
• using defence as an engine for growth,
• and lastly the promotion of a whole-of-society approach to defence.

The Chancellor confirmed to MPs in the Commons: “A new era in the threats that we face demands a new era for defence and security. That’s why we took the decision to prioritise our defence spending by reducing Overseas Development Aid. So that defence spending will now rise to 2.6% of GDP by April 2027.”

A defence theme permeated the review, examining its influence on growth areas like advanced manufacturing, AI, and R&D. With 83 mentions of defence within the CSR, the commitment to the rise in defence spending by April 2027 was welcomed after pressure from the opposition and industry on committing to this expenditure goal with an actual date.

The Chancellor continued how the CSR provided the Defence Secretary with an £11 billion increase in defence spending. This would result in investment in the armed forces, military technology, and supply chains.

CSR Number Crunch:

The UK government is committing substantial funds across key defence technologies including:

• Nuclear Capabilities: Over £23.5 billion allocated, comprising:
  • Over £6 billion to upgrade nuclear submarine production.
  • More than £2.5 billion for a new Small Modular Reactor programme.
  • £15 billion during the current Parliament for a sovereign warhead programme, supporting over 9,000 UK jobs.
• Munitions & Weapons Systems: Over £10.5 billion directed towards:
  • £4.5 billion for munitions investment.
  • £6 billion for munitions this Parliament, including £1.5 billion for an ‘always on’ pipeline and at least six new energetics and munitions factories (generating over 1,000 jobs).
  • Nearly £1 billion in new funding this Parliament for directed energy weapons, aiming for the first European laser-directed energy weapon in service.
• Advanced Technologies: Over £28 billion dedicated to:
  • Over £4 billion in autonomous systems, with £2 billion of new investment this Parliament, including for land drone swarms.
  • £2 billion to back the government’s AI Action Plan under the Department of Science and Technology.
  • £22.6 billion per year for research and development by 2029-30, in support of the forthcoming modern Industrial Strategy.
• Infrastructure & Intelligence:
  • At least £7 billion this Parliament for military accommodation renewal, including over £1.5 billion new investment for rapid work on forces family housing.
  • An increase of £0.6 billion to the Single Intelligence Account (MI5, SIS, GCHQ) by 2028-29 to address rising demand and deter threats.
• National Wealth Fund (NWF):
  • Up to £27.8 billion capital will be invested through the NWF.
  • This will drive growth and create jobs and will invest in the following sectors: clean energy, digital technologies, advanced manufacturing and transport.
  • The Fund will look at dual-use tech and investments to support supply chain resilience.

What about Aerospace?

The CSR mentioned the aerospace sector four times, primarily in relation to Wales and Northern Ireland. It committed over £3 billion in funding from 2026-27 to 2029-30 to this sector, aiming to secure the supply chains for zero-emission vehicles, batteries, and ultra-low/zero-carbon emission aircraft.

WEAF says?

This CSR’s focus on key industries and its £3 billion R&D commitment demonstrate a strong governmental intent to propel defence growth and unlock investment nationwide. This creates a considerable opportunity for our region to thrive, even without direct mention of the South West, as the widespread investment will undoubtedly yield positive impacts here.

Still to come?

The Defence Industrial Strategy will set out how the government will maximise the untapped growth potential of defence as one of the eight priority sectors under the government’s Industrial Strategy, including capitalising on synergies between defence and other priority sectors such as advanced manufacturing and digital and technology.

It is understood that the government will publish its Industrial Strategy later in June.

Sources:

Spending Review 2025 (HTML) – GOV.UK

https://www.gov.uk/government/speeches/spending-review-2025-speech

Parliamentary committee holding Industrial Strategy to account

Strategic Defence Review 2025: WEAF Response