London, UK – Britain’s defence industry is facing significant headwinds, with major contractors warning that crucial investment, recruitment, and strategic planning decisions are being held back by the government’s protracted delay in publishing its Defence Investment Plan (DIP). Senior figures from leading companies including BAE Systems, Babcock, QinetiQ, and Leonardo recently told the Scottish Affairs Committee that while they anticipate future funding, the absence of a detailed roadmap prevents them from acting at full pace, hindering the sector’s ability to adapt to a rapidly evolving global security landscape.
John Howie, Chief Strategic Officer at Babcock, articulated the current period as one of three converging inflection points. The first is the dramatic shift in the geopolitical landscape, marked by heightened global tensions and ongoing conflicts. The second is the rapid emergence of low-cost autonomous technology, notably demonstrated in the conflict in Ukraine, which is compelling the industry to fundamentally re-evaluate its product development strategies and the very nature of future warfare. The third inflection point, Howie explained, is the financial consequence of the first two. He stressed that the UK industry is waiting “with bated breath” for the Defence Investment Plan, noting that large prime contractors are already reorienting their focus towards artificial intelligence (AI), autonomy, and uncrewed platforms. However, he cautioned that this shift “will not gather full speed until we understand what the scale of the investment from Government will be and where their buying patterns will shift.” This lack of clarity directly impedes the UK’s capacity to innovate and maintain a competitive edge in advanced defence technologies.
Mark Stead, VP Radar & Advanced Targeting UK at Leonardo, was equally direct in his assessment. He stated that most significant defence industry sites across the UK “are, or should be, becoming building sites in order to grow more capability.” To facilitate this essential expansion, companies require “clearer commitments through the defence investment plan, which will give us guidance, directional planning assumptions, access to investment, and those major programmes of record that feed us and our supply chain.” Stead highlighted that Leonardo’s Edinburgh operations benefit from existing “programmes of record,” such as the ECRS Mk2 radar for the Typhoon jet and the multinational Global Combat Air Programme, which have maintained funding despite the DIP hiatus. Nevertheless, he emphasized that the plan “cannot come soon enough” for Leonardo to undertake vital long-term planning, co-invest in future technologies, and build the critical skills and industrial capacity necessary for national resilience.
Cathy Kane, Director of Strategic Growth at QinetiQ, corroborated the industry’s concerns, confirming that delays in domestic orders, exacerbated by previous Strategic Defence Reviews and the ongoing Defence Industrial Strategy discussions, had already impacted the company’s growth in the first half of 2025. While declining to provide specific figures, Kane underscored that “the opportunity to have a long-term strategic vision so that we can adapt our business to ensure that we are delivering what you need is most helpful to us.” This strategic vision is paramount for companies to align their research and development, manufacturing capabilities, and workforce training with the government’s future defence requirements.
Neil Holm, Group Managing Director for Naval Ships at BAE Systems, detailed the company’s proactive investments, noting that BAE had invested over £300 million in the last two years. He also looked forward to the long-term stability that the Norway Type 26 deal would bring, sustaining shipbuilding on the Clyde well into the next decade. Despite these efforts, Holm stressed that the alignment between national industrial strategy and defence procurement is “deeply important,” adding that “a close link between the industrial strategy for the UK and defence procurement will give a huge benefit.” This synergy is crucial for fostering a robust domestic defence industrial base that can meet both national security needs and economic growth objectives.
Howie further elaborated on the fundamental challenge presented by the convergence of geopolitical urgency and technological uncertainty. He posed a critical question for the industry: “a billion-dollar missile and a £200 drone carry the same effect?” This query encapsulates a profound shift in military thinking, forcing the entire defence sector to re-evaluate where to invest its resources. Companies are understandably reluctant to commit fully until the government clarifies its own position on the future force mix – the balance of traditional, high-cost platforms versus novel, lower-cost autonomous systems – through the Defence Investment Plan.
Beyond financial investment and strategic direction, the committee heard that the DIP’s absence is having significant knock-on effects on workforce development. It directly constrains the number of apprentices companies feel able to recruit, limits the pace at which they can expand their workforces, and undermines their ability to offer early career workers the long-term certainty needed to make defence an attractive career path. Howie highlighted that the core of this problem lies in “the need for long-term contracts.” Without these foundational assurances, the industry cannot responsibly take on workers it may not be able to retain, potentially creating a critical skills gap in a sector vital to national security and technological advancement.
Why This Matters
The delay in the UK’s Defence Investment Plan (DIP) carries significant implications, extending far beyond the balance sheets of defence contractors and impacting national security, economic stability, and international standing.
National Security and Global Standing: In an era characterized by escalating geopolitical tensions, from the conflict in Ukraine to renewed great power competition, a nation’s defence capabilities are paramount. The UK, a permanent member of the UN Security Council and a key NATO ally, relies on a modern, agile, and well-equipped military. The DIP’s absence hinders the modernization of the armed forces, delays critical technological upgrades, and risks leaving the UK vulnerable to evolving threats. A stalled defence industrial base directly impacts the UK’s ability to project power, protect its interests, and maintain its credibility as a serious global actor.
Impact on Alliances and Interoperability: The UK’s defence industry is integral to its commitments within alliances such as NATO and AUKUS. Delays in defining future defence procurement and investment patterns could impede interoperability with allied forces, making it harder for the UK to effectively participate in multinational operations and collective defence initiatives. A strong domestic defence industry ensures the UK remains a capable and reliable partner, contributing meaningfully to shared security objectives with its allies.
Economic and Industrial Resilience: The defence sector is a cornerstone of the UK’s advanced manufacturing and technology industries, employing hundreds of thousands directly and indirectly across a vast supply chain. It is a major driver of innovation, research and development, and high-skilled employment. Investment uncertainty threatens job security, deters private sector co-investment, and can lead to a decline in critical industrial capabilities. This not only weakens a vital economic sector but also undermines the UK’s broader industrial resilience and technological sovereignty, making it more reliant on foreign suppliers for crucial defence technologies.
Technological Arms Race and Future Warfare: The conflict in Ukraine has dramatically underscored the transformative potential of low-cost, autonomous, and uncrewed systems. Nations globally are rapidly accelerating their investments in AI, robotics, and cyber capabilities. By delaying its strategic investment plan, the UK risks falling behind in this crucial technological arms race. Without a clear “future force mix” and corresponding investment, its forces could face a significant disadvantage in future conflicts, potentially being outmanoeuvred or outmatched by adversaries who have invested more swiftly and strategically in these disruptive technologies.
Workforce and Skills Gap: The inability of defence companies to offer long-term contracts due to investment uncertainty creates a significant impediment to recruitment and retention of skilled talent. Attracting and retaining engineers, scientists, technicians, and skilled manufacturing workers is vital for the long-term health and innovative capacity of the defence industry. A chronic skills gap, exacerbated by a lack of employment certainty, could cripple the sector’s ability to innovate and deliver cutting-edge capabilities when they are most needed, impacting future generations of defence professionals.
Ultimately, the UK’s current situation serves as a critical case study for other nations grappling with similar challenges: how to balance long-term strategic planning with rapid technological change, the imperative of clearly defined government defence strategies, and the critical role of government-industry partnerships in ensuring national security and economic prosperity. The agility and certainty of a nation’s defence industrial complex are increasingly becoming as crucial as the agility and strength of its armed forces.