UK manufacturers urge MoD to channel defence spending to SMEs through binding offset deals

British manufacturers urged the government to ensure that small and medium -sized companies are the main beneficiaries of increasing defensive spending in the United Kingdom by including legally binding displacement agreements in future military purchases contracts.

Before issuing the revised defensive industrial strategy of the government, Makeuk Defense – the commercial body that represents more than 600 defense manufacturers in the United Kingdom – calls for foreign contractors to invest in the vast majority of the value of the contract to the British economy.

Displacement agreements, which are already common in more than 50 developed countries, forcing foreign companies that secure military contracts to invest part of the value of the contract locally-are directly in the production-related production, or indirectly in the wider economy. Defenders say such agreements can create thousands of highly skilled jobs and help secure a sustainable local industrial base.

Andrew Kenyburg, General Manager of Makeuk Defense, said: “British small and medium -sized companies have huge capabilities and the Ministry of Defense must make fun of this, so they also benefit from defense contracts with foreign companies.”

The current approach to the United Kingdom in the displacement is largely informal, with no formal or an enforcement mechanism. Makeuk Defense calls for change, on the pretext that Britain is behind its international competitors in securing industrial benefits from defensive purchases.

As part of its recommendations, Makeuk calls for legally binding requirements that the winning contracts to foreign companies re -invest between 75 percent and 90 percent of the economic value of these contracts in the UK over ten years. This can include the creation or expansion of manufacturing sites, investing in supply chains, or supporting technology transfer and training.

Such a policy, as the group says, will be of special value for the network of small and medium -sized defense manufacturers, as well as neighboring industries such as cars, space, space and gas, which have relevant but currently struggling capabilities to reach defense supply chains.

The proposal also includes an invitation to set regional priorities to support the government’s dispatch agenda. Kenyburg said that investment in displacement could “make fun of the regional growth strategy”, with a focus on historically supported areas such as Northeast and West Midlands.

Currently, small and medium-sized companies receive only 25 percent of the annual defense spending in the United Kingdom, according to only 4 percent of the Ministry of Defense from the Ministry of Defense and 21 percent indirectly through the main contractors.

On the other hand, countries such as Poland and the Gulf states have taken advantage of the displacement agreements to secure long -term internal investment, military training, and the transfer of advanced technology as part of the main purchases of combat aircraft, missile systems, and other equipment.

The invitation to change was reported recent comments from Prime Minister Sir Kerr Starmer, who told the London Defense Conference that it was time to “seize defense profits” and make sure that military investment “is directly in the pockets of workers.”

While the UK pledged to increase defense spending from 2.3 percent to 2.5 percent of GDP by 2027 – and perhaps to 3 percent in the next parliament – industry leaders say that without the targeted industrial policy, many of the risks flowing abroad.

Makeuk’s proposals are a major shift in the UK’s purchasing strategy, making it in line with international standards and presenting a possible batch of the high industrial base in Britain.

“The United Kingdom needs to stop watching defense spending as an isolated cost and start processing it as a long -term investment in industrial ability, regional renewal and national security,” Kenyburg added. “A strong and implemented displacement policy is one of the simplest and most effective ways to achieve this.”