Defense Industry
UK to require overseas defence suppliers to invest back in Britain on contracts of £50 million or more
The Ministry of Defence says overseas firms winning UK defence contracts worth £50 million or more may have to deliver jobs, factories and skills worth up to the full contract value, from April 2027.
The UK government has announced a defence offsets policy that will require overseas companies winning large British defence contracts to invest back into the country. The Ministry of Defence says the rules apply to contracts worth £50 million or more, and the policy was published on 30 October, with the first requirements applying to a select number of procurements from April 2027.
Chancellor John Healey and Defence Secretary Wes Streeting announced the measure during a visit to the BAE Systems site at Scotstoun in Glasgow. It forms part of what the government calls its Back British approach, set out in the Budget.
How the offsets will work
Under the policy, a foreign supplier that wins a qualifying contract can be asked to deliver benefits to the UK that could reach the full value of the contract. A £100 million contract, for example, could bring up to £100 million in new jobs, facilities or skills training. The government lists several ways of meeting the commitment: creating British jobs and apprenticeships, opening or expanding factories in the UK, investing in British suppliers, transferring technology and know-how to UK firms, and using more UK-made components.
A new central Offset Authority will agree, value and monitor the commitments through dedicated Offset Agreements. The Ministry of Defence says the approach will be applied case by case, and that suppliers will be told early where an offset requirement will apply. Ministers stress that the first preference remains buying British wherever possible.
The figures behind the decision
According to the government, more than £35.2 billion has been spent on defence contracts and services with overseas industry since 2016, equal to 11 per cent of the Ministry of Defence’s direct spending with industry and commerce between 2016/17 and 2025/26. Last year the department’s defence investment supported 274,000 jobs in UK industry, 10 per cent more than the year before, and 85 per cent of its spending already goes to UK firms.
The announcement links the policy to the Defence Investment Plan, which the government describes as fully funded with £298 billion over four years, and to a UK target of spending 3 per cent of GDP on defence in 2030 on the way to the NATO commitment of 3.5 per cent in 2035. The Chancellor also confirmed earlier in the week that the National Wealth Fund and the British Business Bank will deploy up to £5 billion over four years into defence, dual-use and other security-related sectors, and that treaty negotiations are starting with the Netherlands, Poland and Finland on a Multilateral Defence Mechanism for buying and stockpiling equipment at scale.
The government notes that Poland, Norway and the Netherlands already use similar offset policies. It points to the defence economy in Scotland, worth £2.5 billion and supporting 12,200 jobs, including the £10 billion Norway export deal for Type 26 frigates and a £453 million Typhoon radar contract in Edinburgh.
The announcement follows other recent UK industrial decisions covered by Geopolitiki, including the UK and Rolls-Royce agree £2.5 billion programme to build next-generation jet engines in Britain.
Official source: UK government announcement on defence contracts and British jobs.
