The UK is working with Finland, the Netherlands and other NATO allies to establish a new international financial institution for defence procurement, with £400 million committed as the British contribution under the Defence Investment Plan, the Ministry of Defence has said.
The detail came in a written parliamentary answer from Minister for Defence Readiness and Industry Luke Pollard on 3 July, responding to a question from shadow defence secretary James Cartlidge, who asked whether an assessment had been made of the merits of UK participation in the Defence, Security and Resilience Bank.
Pollard’s answer set out the government’s chosen vehicle. “The Ministry of Defence is working closely with HM Treasury and with Finland, Netherlands and other like-minded NATO allies on the establishment of a Multilateral Defence Mechanism,” the minister said, describing it as an independent international financial institution that will address collective challenges in defence procurement by aggregating demand to achieve better value for money. According to the answer, the mechanism will lend to members for joint procurement, undertake stockpiling on members’ behalf and provide supply chain finance, improving capability, interoperability and value for money while giving industry greater demand certainty. Pollard added that work continues with close allies including Canada on shared objectives “in advance of Ankara,” a reference to the allied meeting expected in Turkey next week at which officials have indicated more will be said on collaborative programmes.
The Defence, Security and Resilience Bank named in Cartlidge’s question is a separate proposal for a multilateral bank that would use the backing of allied governments to unlock large-scale lending to the defence sector, addressing the difficulty defence companies, particularly smaller suppliers, have faced in accessing finance. The answer did not directly state whether the UK will participate in it, though the question was addressed at the plan’s launch, where a senior defence official confirmed the £400 million for the Multilateral Defence Mechanism is new money now funded by the Treasury and said the government wants to work with both initiatives “to see how the two things can be aligned and brought closely together,” noting that former Prime Minister Gordon Brown has been working on the subject since his appointment by the Prime Minister.
The £400 million contribution formed part of the additional £1.5 billion secured for the plan in the fortnight before publication, which a senior defence official broke down as the MDM funding, £600 million of capital for drones and uncrewed ground vehicles, and £500 million of day-to-day spending for departmental modernisation.
