Scotland’s Defence Sector Faces Critical Juncture Amid Skills Shortages, Committee Warns
Scotland’s defence industry stands at a critical juncture, poised for significant growth amidst increased UK defence spending, yet faces the risk of missing out on this opportunity due to persistent and deepening skills shortages. This is the stark warning issued by the Scottish Affairs Committee in a new report, which highlights a disconnect between the high demand for specialised technical training and the current provision, threatening both Scotland’s contribution to national defence strategy and its economic potential.
The committee’s report underscores that while Scotland possesses a world-leading defence sector, characterised by its expertise in naval shipbuilding, advanced manufacturing, and submarine operations, a failure to address the long-standing deficit in skilled labour could severely undermine its capacity to capitalise on this opportunity. Patricia Ferguson, chair of the committee, articulated this concern, stating: “Scotland has a world-leading defence sector and is well-placed to benefit from increased UK defence spending. However, unless long-standing skills shortages are addressed, this opportunity could be missed.”
The report meticulously tracks a concerning trend in defence expenditure within Scotland. In the fiscal year 2024/25, Scotland received 6.78% of the Ministry of Defence’s (MoD) industry spending, amounting to £2,165 million. This represents a notable decline from five years prior, in 2019/20, when the figure stood at 10.19%, or £2,553 million. This reduction in Scotland’s share comes against a backdrop of rising overall UK defence spending, which increased from approximately £59 billion to £66 billion over the same period. Such a proportional decrease raises questions about the allocation of contracts and the competitiveness of the Scottish industrial base, despite the committee’s assertion that “Scotland remains central to the UK’s defence sector at a time when maintaining a resilient industrial base is more critical than ever.”
To reverse this trend and fully harness its potential, the committee advocates for sustained, long-term investment across the entire defence supply chain, focusing on demand, skills development, and innovation. The report critically warns that “inconsistent funding and stop-start procurement weaken sovereign capability, workforce retention and the longer-term value that the Scottish defence sector can provide.” This highlights a fundamental challenge where unpredictable government contracts hinder companies’ ability to plan for the future, invest in training, and retain a specialized workforce, ultimately impacting the UK’s strategic defence autonomy.
A key mechanism for addressing the skills gap lies in the establishment of Defence Technical Excellence Colleges (DTECs). These institutions are designed to provide advanced technical skills and apprenticeships crucial for the modern defence industry. However, the committee notes that Scotland has fallen behind England in the progress of establishing these vital colleges. Two DTECs are proposed for Scotland, yet their full realization is reportedly contingent on matched funding from the Scottish Government, with the UK Government indicating that without this financial parity, only one will proceed. Patricia Ferguson emphasized the importance of collaboration: “One of the main ways skills training can be expanded is through DTECs, which have the potential to strengthen Scotland’s skills pipeline and expand access to high-quality apprenticeships that can support the UK’s defence ambitions. The committee hopes to see the UK and Scottish Governments work together to deliver both proposed DTECs in Scotland and, more widely, that Scotland can accelerate work to develop the skills base its defence sector needs.”
Small and medium-sized enterprises (SMEs) constitute 98.2% of Scotland’s businesses and play an indispensable role in the defence supply chain, often driving innovation and specialized solutions. Yet, the report reveals a stark disparity: approximately 0.078% of total departmental direct expenditure is spent with Scottish SMEs. This figure is described by the committee as substantially lower than Scotland’s population share and incongruous with the significant scale and importance of the country’s defence manufacturing base. Ms. Ferguson called for action: “It’s also important that Scottish defence SMEs get the support they need to grow. Removing barriers to defence supply chains and improving engagement with prime contractors will help unlock their full potential and help make sure the economic benefits of defence investment can be felt across Scotland.” These barriers often include complex procurement processes, lack of access to prime contractors, and difficulties in navigating security clearances.
Beyond skills and procurement, the report also addresses the controversial issue of “debanking,” where financial institutions deny services to defence firms. The committee deems it “unacceptable for companies working to deliver national security objectives to be denied access to financial services,” and urges the government to engage proactively with the financial sector to eradicate this practice. Debanking can severely impede a company’s operations, affecting payroll, investments, and overall viability, thereby posing a direct threat to the resilience of the defence industrial base.
Finally, the committee highlights a critical deficit in public understanding and engagement. While the Defence Industrial Strategy advocated for a public conversation on the importance of defence, insufficient progress has been made, particularly in Scotland. The committee has called on the government to outline its strategy for delivering this vital dialogue, recognizing that public support and awareness are crucial for attracting future talent and sustaining the industry.
In conclusion, while welcoming initiatives such as the Defence Growth Deal and the Defence Universities Alliance, the Scottish Affairs Committee’s report delivers a clear message: both the UK and Scottish governments must act with greater urgency to fortify Scotland’s defence skills base. The availability of a highly skilled workforce is not merely an economic consideration but a pivotal factor in determining Scotland’s capacity to fully leverage defence investment and contribute effectively to national security objectives in an increasingly unpredictable global environment.
Why This Matters
The findings of the Scottish Affairs Committee’s report resonate far beyond the immediate concerns of Scotland’s defence industry, touching upon crucial aspects of national security, economic prosperity, and intergovernmental cooperation across the United Kingdom.
For Scotland, addressing the reported skills shortages is not merely about securing defence contracts; it is fundamental to its economic future. A robust defence sector provides high-skill, well-paid employment opportunities, particularly in regions like the Clyde and Fife, which have long histories of shipbuilding and heavy industry. These jobs stimulate local economies, foster innovation, and attract further investment, creating a multiplier effect across the supply chain. Missing out on increased defence spending due to a lack of skilled labour would represent a significant lost opportunity for economic growth and diversification, potentially exacerbating regional inequalities and hindering Scotland’s capacity to lead in advanced manufacturing and engineering.
From a United Kingdom perspective, the health of Scotland’s defence industrial base is inextricably linked to national security. Scotland hosts vital strategic defence assets, including the UK’s nuclear deterrent at Faslane and critical shipbuilding facilities. A weakened industrial base in Scotland directly impacts the UK’s ability to maintain its sovereign defence capabilities, meet its NATO obligations, and respond effectively to evolving global threats. The report’s warnings about inconsistent funding and procurement practices underscore the broader challenge of maintaining a resilient and agile industrial foundation essential for national resilience in an increasingly volatile geopolitical landscape.
Furthermore, the report highlights the complexities of intergovernmental relations within the UK’s devolved structure. The stalled progress on Defence Technical Excellence Colleges (DTECs) due to disputes over matched funding exemplifies how political and financial disagreements between the UK and Scottish Governments can directly impede strategic national initiatives. Effective collaboration is crucial for delivering projects that benefit both national security and regional economic development.
Finally, the issues raised, such as skills gaps, supply chain resilience, and the treatment of defence firms by financial institutions, are not unique to Scotland or the defence sector. They reflect broader challenges faced by advanced manufacturing industries globally. The committee’s recommendations, if implemented, could serve as a blueprint for other sectors and regions seeking to bridge the gap between industrial potential and workforce readiness, ultimately strengthening the UK’s overall industrial strategy and its capacity to thrive in a competitive global environment.