Defence tech firms hit hard by investment plan delay

The vast majority of British defence technology suppliers are reassessing investment and recruitment decisions as a direct result of the government’s failure to publish the Defence Investment Plan, with companies reporting contract suspensions, funding delays and supply chain cost increases across the board, according to a survey published by the trade association techUK.

The organisation surveyed 45 of its defence technology members during May, spanning 18 small, 12 medium and 15 large enterprises, all of them existing or recent suppliers to the Ministry of Defence, and published the findings on the first anniversary of the Strategic Defence Review. A full year on from the review, techUK said, the absence of the Defence Investment Plan, the document industry needs to plan investment, recruitment and supply chain commitments against the review’s ambitions, has become “the single most significant driver of harm for the sector.”

Seventy-three per cent of respondents report that the market environment for UK defence tech companies has declined since the review was published, with only 13 per cent reporting any improvement. Seventy-three per cent have experienced a contract suspension or cancellation in the past six months, 87 per cent have experienced funding delays or reductions, and 47 per cent are still awaiting a contract extension from the financial year that ended in March, with several reporting that this now puts the delivery and maintenance of existing operational capabilities at risk. Sixty-seven per cent say SMEs in their supply chains have been directly hit, and 93 per cent, 42 of the 45 respondents, are reassessing investment or recruitment decisions as a direct result.

Asked what sat behind the suspensions and delays, members pointed by a clear margin to the delay to the Defence Investment Plan, named by 62 per cent of respondents, ahead of the wider financial climate within the Ministry of Defence, delays to defence reform and senior appointments, and a shortage of commercial officers to get contracts onto paper. The result, members told techUK, is a self-reinforcing cycle in which uncertainty defers commercial decisions, deferred decisions drive contract suspensions and funding gaps, and those gaps force companies, particularly SMEs, to cut headcount, withdraw investment, and in some cases exit the UK defence market entirely in favour of allied markets with a more predictable commercial cadence. One major systems integrator reported around £30 million of committed work held up by contracting delays, with knock-on risk to delivery against NATO’s Steadfast Defender 2027 commitments.

The techUK chief executive, Julian David, said the review had set out “a bold and welcome ambition” that industry shares, but that twelve months on, “we are still waiting for the Defence Investment Plan.” Without it, he said, “there is no credible plan to fund and implement the SDR’s recommendations”, and the cost of the delay “is now showing up in our members’ order books, their balance sheets, and their decisions about whether to remain in the UK defence market at all.” The results, he said, were stark, with the industrial capability the review depends on “being eroded in real time” at exactly the moment the government is asking industry to scale up. “This is no longer a theoretical risk; it is measurable, immediate harm.”

The trade body is calling on the government to publish the plan before the NATO Summit in Ankara on 7 July with sufficient granularity for industry to plan against, warning that failure to do so “will greatly undermine the UK’s status as a credible and reliable partner” in the alliance. It also wants interim certainty through confirmed contract extensions and a cleared backlog of awarded-but-not-contracted tenders, action on the commercial officer bottleneck, and direct engagement with industry on the sequencing of the plan’s implementation. techUK has shared the full results with the government through the Defence Industrial Joint Council and written to the Minister for Defence Readiness and Industry, while warning that “the window in which industry can absorb continued uncertainty without lasting damage is closing.”

The survey’s findings have taken on a sharper edge in the days since publication, with the Defence Secretary John Healey resigning on Thursday over the funding settlement behind the very plan the industry is waiting for, telling the Prime Minister it fell well short of what is required, and the trade body Make UK Defence reporting separately that the delay has already seen member companies go bust and innovative SMEs make plans to move abroad.