Dave Atkinson, UK Head of Manufacturing, SME & Mid Corporates at Lloyds, considers how a new era for UK defence presents a growth opportunity for manufacturing SMEs.
The UK’s new Industrial Strategy and Strategic Defence Review reflect a world where a growing focus on national security will direct ever more investment into defence supply chains. As global threats continue to evolve, these initiatives outline the nation’s ambition to build a more integrated, innovative and resilient defence sector. And a strong defence sector is not only a matter of national security; it can also be a key driver of economic growth.
Central to the UK’s strategy is a renewed initiative to reform and reshore defence procurement, which presents an opportunity for manufacturers to rise to this challenge and bid for new contracts. It’s a move that the Prime Minister has said will create a ‘defence dividend’, creating highly-skilled jobs, security and rebuilding the nation’s industrial base.
As one of Britain’s biggest banks, we know that we have a role to play here too, backing UK manufacturers as they diversify, innovate and invest for the future.
Safer and stronger
Manufacturers of all sizes must remain alert to the growing opportunity that this expanding market presents. Ministry of Defence (MOD) spending with industry already supports more than 200,000 jobs across the UK, with nearly 70% of that investment being directed outside London and the South East[1].
The UK’s Industrial Strategy highlights defence and advanced manufacturing as being among eight sectors with the greatest growth potential over the next decade, with an ambition to make the UK a defence industrial superpower[2].
The Prime Minister has now made a commitment to increase spending on national security from 2.3% to 5% of GDP by a target date of 2035, including 3.5% for core defence and 1.5% for resilience and security[3]. In today’s terms, that totals more than £140 billion a year[4]. And this comes alongside spending targets that aim to ensure SMEs get a bigger share of that spend, which has historically been the preserve of larger contractors.
Boosting the defence industry’s ecosystem in this way can also help improve productivity, upskill workers, increase exports and drive regional equality.
Accessing opportunity
To that end, Lloyds has specialist teams to provide the financial solutions that enable manufacturers to develop new capabilities, expand capacity and deliver on defence contracts. We have built strong partnerships with industry bodies including MTC (Manufacturing Technology Centre) and Make UK, which help manufacturers unlock access to defence suppliers and SMEs.
Supplying the MOD and its Tier One suppliers means meeting security, quality and compliance standards that can be far more rigorous than those demanded by other industries. But defence contracts can also open the door to funding streams that support firms’ innovation and develop new skills, while also diversifying their revenue streams and boosting their export potential.
It all represents a new era for the defence sector and a fresh opportunity for SMEs to play an ongoing and important role in the UK’s national security, while also generating economic growth.
See how Lloyds is supporting UK manufacturers to innovate, grow, and lead at:
[1] business.gov.uk/campaign/invest-in-great/defence/
[2] gov.uk/government/publications/industrial-strategy-sector-plans/sector-plans
[3] gov.uk/government/news/uk-to-deliver-on-5-nato-pledge-as-government-drives-greater-security-for-working-people
[4] commonslibrary.parliament.uk/research-briefings/sn02783/
