Defence companies are being refused bank accounts because of the sector they work in, and the practice should be brought to an end, according to a report by the Scottish Affairs Committee which describes the situation as unacceptable.
The committee heard during a private roundtable with small and medium-sized enterprises that defence businesses are often viewed by financial institutions as carrying reputational risk, and that one of the companies giving evidence had been debanked because of its connections to the sector.
Participants suggested defence businesses are treated as undesirable by some institutions and support bodies. The committee also heard of landlords who will not rent properties to defence companies.
Luke Pollard, Minister for Defence Readiness and Industry, acknowledged the problem in oral evidence, telling the committee the department had seen examples of “good defence businesses supporting our national security” being debanked, which he said was “not acceptable in a time of increasing risk”. He expressed hope that financial institutions would increasingly support defence firms and ensure they have access to appropriate banking services.
The committee’s recommendation states: “It is unacceptable that SMEs working to deliver the UK’s national security objectives are being denied access to financial services through so-called ‘debanking’. The UK Government should assess the impact of this practice on Scotland’s defence industry and engage with the financial services sector to end this practice, which is damaging to the UK’s national security objectives, SME growth, and the provision of highly-skilled jobs in Scotland’s defence sector.”
The Scotland Office is asked to report back to the committee within six months on the findings of that work and the actions taken in response.
In its summary, the committee says it is “especially concerned by reports of defence businesses being denied access to banking services, which risks undermining investment and growth in the sector”.
Debanking sits within a broader section of the report on how the sector is regarded, which the committee found continues to affect recruitment and business sustainability.
Some witnesses expressed a view that Scottish Government policies have contributed to detrimental perceptions. The committee describes the sector’s negative public image as one of its most persistent barriers to recruitment.
On the government side, the report records plans for Destination Defence, a communications campaign intended to increase awareness of careers in the industry, which the department says is seeking to improve the sector’s reputation and attract new talent. John Howie of Babcock, who is involved through the Defence Industrial Council, drew a comparison with Destination Nuclear, which he said had increased applicant numbers by raising awareness of less visible roles.
The committee concludes that the Defence Industrial Strategy called for a public conversation on the importance of defence but that sufficient progress has not been made, and asks the government to set out in its response how it plans to deliver that conversation in Scotland.
Europe could be on the brink of conflict and it appears banks are blinkered in respect to our security. A bit like our new Prime Minister, who will never favour defence over social security. I wonder if such matters were on the minds of the Ukrainian people on the day of Russia’s invasion. The plain truth is that our security is not the number one responsibility of the current Labour Government.
I don’t think it even gets to number 100.
A pejorative view. The govt is rewriting the war books and since coming into office has increased defence spending as a %age of GDP from 2.3% to 2.7%. The October budget will almost certainly see a further increase and the plan to reach the NATO target of 3.5% by 2035. Burnham’s first overseas visit was to Ukraine, the front line of the conflict with Russia. Their defence is our defence. Burnham has affirmed continued UK support for Ukraine.
As of 24 July 2026, the UK has committed £16 billion in military support to Ukraine since Russia’s full-scale invasion in February 2022. This includes £2.26 billion contributed to the G7 loan for Ukraine, which is to be repaid using profits from frozen Russian assets.
GOV.UK
In addition to donating significant assets like AS/90, Bulldogs, Mastiff, Wolfhound, L118 guns, tanks, Storm Shadow, Starstreak, ammunition, training. The UK cupboard looks bare because we have sent stuff the Ukraine. Financially the UK has also committed:
£5.6 billion in non-military support
£3.5 billion in UK export-finance cover for reconstruction and defence projects
£3 billion per year in military aid through 2030–31, and for as long as necessary
Training for more than 63,000 Ukrainian personnel
More than £2.7 billion pledged to the International Fund for Ukraine, which procures military.
Burnham understands, like his predecessor prime ministers, that No 1 UK security item depends on Ukraine but also on UK self sufficiency in key industrial capabilties and a stable society.
At home the T26 program, the Dreadnoughts, and project Astrea are all fully funded.
NATO spending numbers are airy-fairy with no agreed way to account for what’s going on. However, I think I can say your 2.7% for this year is unjustifiable. I’ve never seen official numbers that high before next year’s projections.MOD spend is auditable and more concrete and excludes some of the non-defence spending that NATO allows. In 2025/6 spend was about £62bn at 2.03% of GDP. had that percentage been held constant, spend would have been £64.2bn in 2026/7. Before DIP that was suppose to rise to £64.9bn. Post-DIP the plan is now £68.3bn with £1.8bn unfunded.
Have I got that wrong?
TBH Jon, I’ve no idea on numbers vs financial time periods. I’m just going off govt statements; what they report to parliament etc. No doubt, as my grandmother would say, they will put ‘their best (political) foot foward’. But at some point you have to faith in our democratic system. My take is that they took over a shambles and are spending wisely as much as we can afford – on salaries, housing, recruitment, infrastructure, sovereign industrial base, while protecting key programs like the frigates, Astrea, Dreadnought, F -35, funding new drones and deep strike while trying to salvage something from disasters like Ajax and rein in extravagent programs like Boxer in favour of cheaper options. Also, with services numbers so low there’s a limit to how quickly we could introduce and deploy new equipment. My reading of things is that we are probably recovering our defences as fast as the laws of physics allow. I think we will see another £5b in the budget for key gaps…- a couple morw E7s perhaps. I see Burnham, unlike Reeves and Starmer is open to joining Mark Carney’s defence bank idea. That would free up more money. Overall I think we are turning the corner.
Apologies. I managed to post my previous comment in the middle of editing the numbers.
I was going to say MOD actual spending has only risen from 2.03% last year to 2.06% of GDP this year. The legal budget of £65.1bn is still pre-DIP (although a little more than the original £64.9bn estimate) and will not rise until after parliament votes a larger one. So it’s almost all still in the future.
Paul, I’m sorry to say that Labour have been lying about increasing defence spending. In headline figures, the Defence budget has indeed increased…. However, the increase to 2.7% is actually down to them folding in the security budget into Defence – there is no new money.
Also, you’ll here them claim how much they are putting into defence investment for new equipment. This is true. But to pay for a lot of that, Defence has been asked for £10.9 Bn of savings from its ops budget over 4 years – that is the root cause of the Army having the cancel training, of AAC Wildcat being cut in 2027 and so on.
Thx. What’s in the ‘security budget’?
In essence the security services, so The Security Service and The Secret Intelligence Service. I’m not sure about GCHQ – others may know.
Basically our spies. Now, arguably putting them into Defence is inherently sensible. But claiming that as new money for defence is disingenuous at best, dishonest if we’re being accurate.
Thx. Given the increasing emphasis grey zone ‘warfare’ I can see the logic. As you say it makes comparisons invidious. Need good intelligence though, stitch in time etc
The whole Single Intelligence Account (MI5, MI6 and GCHQ) will count towards NATO Defence spending from 2027. Currently, only parts count.
Sorry, Paul, but you need to be careful of what the government says. It trumpets future spending plans as though they’ve been spending it that way for years. The DIP separates NATO headline spending from actual MOD spending, so it’s hard to validate the headline numbers.
There has a fundamental change in attitude and regulation in regards to defence companies. I work for a large accounting and professional services firm, if I wanted to take on a SME client who operated in the defence sector, it would be immediately assessed as a High Risk. I would then spend a huge amount of time and effort jumping through hoops for the “Know Your Client” and “Anti Money Laundering” processes, at the end of which the Compliance and Ethics Committee will still almost certainly decide “No, we don’t want to do business with them”.
how long does it take to change the law..
then fine the banks millions for putting the defence of the realm in danger.
just a thought..
The banks forget quite quickly that the taxpayer saved their backsides in 2009. Lloyds in particular were let of paying a lot of that back. I think that should be looked at again. Here is another thought though. There is a scheme that protects your money up to I think it’s around 80K. Tell the banks if they debank defence companies they will be kicked out of the scheme and their banks will have a 20 % levy on profits on top of what they pay now.
Protection recently increased to £120K per bank group.
It’s this kind of small minded prejudice and defensiveness which is holding the country back.
Sounds a bit dubious to me. Rolls Royce, BAE etc don’t appear to have any problems getting money from banks.
That’s because they are not SME’s and they have an International outreach
You reap what you sow. Certain folks have spent years poo pooing over the Defense Industry causing a cautious attitude shall we say from the Financial sector. Then you have Academia preaching everything military is colonialist and the sons of Satan. You can’t expect that ingrained attitude to change just because Labor got in power.
Labour.
This is where you need state intervention.. essentially a UK bank should not be able to refuse UK company that is marked as vital sovereign capability unless it’s for financial viability reasons only. It should be a prudential regulation authority responsible.. National interest should part of the safety and soundness assessment of a British banking institution..
For to long we have let neoliberal ideology weaken our nation state.. true powers use neoliberalism to their advantage in certain areas.. retaining national oversight and mercantilist control in others… both China and the US run this way..
May-by Mr Carny’s (Canada’s PM) has got the right idea the government should create a “Resilience Bank” that all military contracts are payed from and at the same time allow those same military contractors to pay into so that they can pay their bills and their employees.
Without revealing too much….it’s not just banking, it’s insurance too. ESG parameters are being actively used as an excuse not to over cover to defence related sectors. I did formally raise this within the company I work for (a major insurance firm within Lloyd’s of London) and was greeted with what amounted to “defence is too controversial”. I paraphrase, but barely.
Maybe Farage can help champion this…oh wait he lost interest in debanking the moment he got his millionaires bank account back
The banks and some trade unions oppose defence? Defence provides jobs and profits. Without defence there will be no jobs or profits. How childishly stupid of them.