Claim on defence spending with UK firms questioned

The Ministry of Defence’s headline claim that the bulk of its contracts are placed with UK-based businesses has been questioned by industry, which says the figure depends on what counts as a British company.

The challenge was put at a Treasury Committee evidence session on defence spending and finance on 3 June 2026, which questioned three experts on how the UK funds its defence capabilities and on the dynamics between the Whitehall departments that sign off defence spending. Andrew Kinniburgh, Director-General of Make UK Defence, gave evidence alongside Lucia Retter, Assistant Director for Defence and Security at RAND Europe, and Max Warner, a senior research economist at the Institute for Fiscal Studies.

Kinniburgh told MPs that his organisation was working with the department to define what a UK business actually is, suggesting the existing measure was superficial. He referred to “some quite glib statements from MOD about 80% of contracts being let with UK-based businesses” and asked what such a description really meant.

The test, he argued, should be more than a registered address. “What is a UK-based business? Is it one with a postcode and a company number, or is it actually a company that’s creating intellectual property, registering patents, making stuff using the supply chain in the UK?” he said, suggesting it was a question the committee might want to put to the department.

His point was that a firm could count towards the headline figure while carrying out much of its valuable work, from research and design to manufacturing, outside the United Kingdom, meaning the proportion of contracts placed with UK-registered companies may overstate how much economic benefit actually stays in the country.

The intervention came as Kinniburgh argued that greater certainty of future demand would unlock more private finance for defence firms, and warned that British companies were being bought up by German and American buyers, with parts of the United States actively courting UK defence businesses to relocate. He described the risk as not just a brain drain but a “company drain”, in which firms and the intellectual property and skilled people they embody leave the country altogether.

Government statements have increasingly stressed the share of defence spending going to British industry and to small and medium-sized enterprises, billing it as evidence that rising budgets are supporting domestic jobs and skills. The challenge raised in the evidence is that such figures turn on definitions, and that without a clearer test of what makes a business genuinely British, a headline proportion may not capture where the design, the patents and the manufacturing actually take place.