Rachel Reeves says increase in lending capacity will help UK defence sector

Chancellor Rachel Reeves is pledging further support for the UK defence industry, saying the move can also help the Government with its mission of “driving growth across the UK”.

British defence companies selling products overseas are to benefit from a £2bn increase to UK Export Finance (UKEF) lending capacity – a measure the Government believes will boost opportunities for firms selling equipment such as missiles, aircraft and armoured vehicles on the international market.

Ahead of a visit to Scotland on Friday, Reeves set out plans to increase the lending capacity of UKEF – a Government department that provides financing to those buying goods from the UK -from £8bn to £10bn.

In 2023-24, 650 exporters benefitted from its help, supporting 41,000 jobs across the UK.

The increase comes as the UK Government raises its defence spending to 2.5% of GDP – a move being funded by cutting the international aid budget.

Reeves said: “The world is changing, and we must bring about a new era of security and renewal that protects working people and keeps our country safe.

“This increase to UKEF’s lending capability is our industrial strategy in action, bolstering our defence industry and supply chains, creating jobs and driving growth across the UK.

“This is alongside an increase in our defence spending to 2.5% of GDP. We are strengthening our national defence, kickstarting economic growth and delivering the stability we need to keep us safe.”

Business Secretary Jonathan Reynolds said a strong defence sector is “vital for a Britain that’s both secure at home and strong abroad”, but would also allow business to benefit.

He said: “That’s why our Plan for Change has put defence at the heart of our industrial strategy, helping us drive growth while bolstering our national security for the long term.

“This new UKEF lending capability strengthens our support for the sector even further, and will help our defence firms export the best of British expertise abroad while boosting jobs and growth at home.”

Scottish Secretary Ian Murray said: “We are entering a new era for our national defence and Scotland’s world-class defence industry is playing a big role in meeting that global security challenge.

“Scottish defence businesses – with their skills, expertise and innovation – have a huge opportunity to benefit from this £2bn in new lending.

“That will mean a boost in skilled jobs and economic growth in Scotland and show the best of our world class industry abroad.”

Shadow defence secretary James Cartlidge said Labour’s procurement had not reached the needed scale and pace.

“We welcome efforts to fire up the defence industrial base and export is critical.

“However, we also need a strong domestic order book and Labour still haven’t turned their spending promises into actual procurement at the scale and pace we need.

“Having wasted eight months stalling on our defence spending increase, when they should have been placing orders to replenish the munitions we have rightly given to Ukraine, Labour really need to get on with it and back Britain’s defence industry.”