Credit: Robenson Gassant on Unsplash UK defence companies plan to invest a combined £19.75bn over the next 12 months, according to new research from law firm White & Case. Research company Censuswide surveyed 250 senior decision-makers at UK defence companies and defence technology start-ups for the study between 17 and 24 September. The £19.75bn is the total for those 250 firms, which plan to invest an average of £79m each. Most expect to spend heavily.
More than a quarter (27%) plan to invest over £100m, while another 67% expect to spend between £50m and £100m. Staying competitive was the most common reason, cited by half of the firms. Demand for next-generation defence technology (42%), export opportunities (38%) and rising government defence spending (33%) followed. Just over half of the companies (56%) plan to invest in defence technology.
Among them, 46% want to develop new technologies and 44% want to increase production. Cybersecurity was their top priority (46%), followed by advanced sensors (45%) and space technology (39%). However, older kit has not been dropped. The report found that 57% of companies also plan to invest in traditional defence hardware, including 46% of start-ups and early-stage firms.
Air defence and counter-drone systems were the main uses for that technology, each cited by 68% of those firms. “The nature of conflict has changed completely in the last five years and strengthening air-defence systems is now a major priority,” said Angus Nunn, a growth capital and technology M&A partner at White & Case. He added that some of the most wanted products are low-cost systems that can stop drones and missiles for a fraction of the cost of older equipment. AI is also changing how existing defence systems work, he said. Almost all of the firms (97%) also said the UK is Europe’s leading destination for defence technology investment.
In addition, 76% plan to expand in the UK over the next year. By comparison, 55% plan to expand elsewhere in Europe, 27% in the US, and 26% each in the Middle East and Asia-Pacific. To grow, companies are mostly looking to work with others. Strategic partnerships were the most popular route (44%), followed by organic growth (42%), joint ventures (40%) and acquisitions (38%).
Many will also need outside money. According to the report, 97% of the firms plan to raise significant external funding over the next 12 months. Nunn also expects more deals. More investors now want exposure to the sector as earlier restrictions ease, he said, which should lead to more fundraising, investment and M&A across the UK and Europe.
Patrick Sarch, who leads UK public M&A at White & Case, said the UK attracts “deep pools of capital” and strong defence and technology businesses. Even so, he said there is more work to do. As private money flows into the sector, the challenge now is to make sure UK companies “continue to have access to the right funding on the right terms in order to scale and compete globally.”
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