Budget 2026: Defence spending ambitions must be matched by action

Reacting to the Budget, Duncan Cochrane-Dyet, partner and head of defence sector at MHA, said: “The chancellor restated his commitment to the Defence spending targets of 3.5% of GDP by 2035 with an interim target of three per cent by 2030. But the ‘how’ has still not been answered, it has been deferred to the spending review next year, although there was an encouraging commitment that it would be fully funded and at least partly financed by cuts to investment plans in other government departments.

“Importantly though, the British Business Bank and the newly created National Wealth Fund, will have a focus on defence. This does indicate more funding and contracts for UK businesses, and following on the heels of the chancellor’s earlier comments about channelling government spending in general toward UK businesses, bodes well for the UK defence industry.

“My concern is that next year, the fiscal pressures may be even higher, and an assumption that for example conflict in the Middle East will resolve and thereby inflationary pressure on oil and gas will reduce, is optimistic. That spending review is a long way from being a done-deal.

“In summary? Consistency towards defence in other areas of the Budget announcements, a clear expression of support and an intention to meet eventually that 3.5 per cent of GDP spending target. But the immediacy of the need for a vastly better defence capability for the UK has not been addressed, and the ‘how’ has been kicked further down the road also.

“Remember - there is a long ‘flash to bang’ delay between the money being made available, and the necessary weaponry and tools being contracted, designed, made and deployed. So, the question I asked ahead of this budget remains: In the face of threats from Russia et al, are we going to get there fast enough?”