Over a quarter of firms plan to invest more than £100 million in the next year.
UK defence firms are increasing investment to meet soaring demand for next-generation defence technologies, according to new research by White & Case. The study, based on a survey of UK defence companies and defence technology start-ups, reveals that more than a quarter (27%) of firms plan to invest over £100 million over the next 12 months, with the average planned investment reaching £79 million.
The research also found that 67% of firms expect to invest between £50 million and £100 million. These investment plans are primarily driven by the need to maintain competitiveness (50%), demand for next-generation defence technology (42%), export opportunities (38%), and rising government defence spending (33%).
A significant majority, 97% of surveyed UK defence firms, believe the UK is the leading European destination for defence technology investment. This confidence is reflected in expansion plans, with 76% of companies intending to expand their presence in the UK over the next 12 months, compared with 55% in Europe, 27% in the US, and 26% in the Middle East and APAC.
More than half (56%) of UK defence companies plan to invest in defence technology in the coming year. Among these firms, 46% are investing to develop new technologies, while 44% are seeking to increase production capacity. Cybersecurity and digital capabilities rank highest among the new technologies being prioritised for increased investment (46%), followed by advanced sensors (45%) and space technologies (39%). Air defence and counter-drone capabilities are cited by 68% of firms as the two leading applications for this technology.
Commenting on the findings, Patrick Sarch, Head of UK Public M&A at global law firm White & Case LLP, said: “It is particularly encouraging to see defence and defence tech companies confirm the UK as Europe’s leading destination for investment in one of the hottest and most strategically important sectors, as military expenditure soars and companies race to invest in and develop new technologies. With its ability to attract deep pools of capital, world-class defence and technology businesses and strong management talent, the UK is a natural hub for defence technology investment. As private capital pours into the sector, the challenge now is to capitalise on that momentum and ensure UK companies continue to have access to the right funding on the right terms in order to scale and compete globally.”
Angus Nunn, Growth Capital and Technology M&A Partner at global law firm White & Case, added: “The nature of conflict has changed completely in the last five years and strengthening air-defence systems is now a major priority, with some of the highest-demand capabilities being affordable, scalable technologies that can intercept drone and missile threats at a fraction of the cost of legacy systems.
“The application of AI to existing defence systems is also transforming capabilities across the sector. The sector is set to remain highly active as governments increase defence spending and the UK and Europe place greater emphasis on developing world-class sovereign defence technology capabilities. At the same time, the pool of available capital is broadening significantly as previous restrictions are relaxed and investors increasingly seek exposure to the sector. This should help drive further fundraising, investment and M&A activity across the UK and Europe.”
