UK defence companies are leaving for Donald Trump’s big-spending US, industry insiders warn, which could have damaging consequences for national security.
Government officials have repeatedly emphasised the need to build up the domestic defence industry to ensure the UK is not reliant on foreign suppliers in case of conflict – plans that now appear in jeopardy.
Defence Secretary John Healey said in a speech this week that the war in Ukraine showed “that when a country is under threat or forced to fight, its armed forces are only as strong as the industry that stands behind it”.
But industry figures say increasing numbers of British small and medium enterprises (SMEs) are being tempted to the US because of its larger, flourishing market compared to uncertainty and red tape in the UK.
Shorts
Kevin Craven, CEO of the ADS Group which represents 1,800 British defence firms, said that while the US has always been a strong competitor for talent, the “intensity of the problem is new”.
The number of his members considering a move across the Atlantic has at least trebled in the past two years, he said, adding “concerns are rising and the competitive pressures from overseas are rising”.
One industry source said they knew of five firms that are planning to move to the US, spanning drones, AI, power systems, and simulation tech.
Healey warned this week that the country is already facing “a huge shortage of home-grown talent”.
‘I don’t want to abandon the UK’
Rob Taylor, a former Royal Marine, is the founder of 4GD, a military technology company based in London. He wants to remain in the UK but the business case for relocating to the US is becoming hard to ignore.
“I am the latest in line of a family that has served in the British military for over 100 years but we have had to look seriously at the US,” he told The i Paper.
“That is not because I want to abandon the UK. I’m a former Royal Marine; 4GD was founded here to improve how British and allied soldiers train for close combat.
“But sentiment does not pay wages, fund research and development, or give investors confidence. If the customers, revenue and capital are somewhere else, eventually companies have to follow them.”
Industry figures told The i Paper the problems are being exacerbated by the Government’s failure to release the Defence Investment Plan (DIP), which will lay out military funding for the next decade.
The document was due to be published last autumn but is still being delayed, which insiders say is due to disagreements between the Ministry of Defence (MoD) and the Treasury.
The delay is having an effect. A British aerospace company working on a replacement for the Red Arrows fighter jet collapsed this month over what administrators described as “a sustained period of pressure” on cash flow after “continued delays to the DIP, combined with geopolitical factors”.
By contrast, Taylor said that the “American customer is bigger, procurement routes can be clearer, and investors are far more comfortable backing defence”.
“The US also sends stronger demand signals,” he said. “If a capability is useful, there is a more obvious route to trials, orders, follow-on funding and private capital. In the UK, SMEs are often asked to innovate, demonstrate and subsidise progress, but without the contractual certainty needed to scale.”
Craven said the US defence economy offers larger markets for military products and much more private capital to invest in the sector, while the “orders and the size of the defence marketplace in the UK is growing much more slowly”.
“In the US, they have the largest ever defence budget just announced by Trump. Europe has the Safe fund initiative. In Nato, using percentage of GDP as a measure, the UK is now 12th in the table of spenders on defence, when we used to be third,” he added.
“It’s in danger of becoming structurally a less attractive marketplace. If you’re a small business, and you’ve got people coming from the state of Florida and offering free rents and rates for three years, and there might be more orders available in those environments, it becomes difficult.”
“It’s not a patriotic decision, but it’s a business decision.”
Hamish Mundell, an associate fellow at military think-tank Rusi, said that Britain is “at risk of losing its best firms and engineers to the US, where procurement is faster and the scale of opportunity is significantly larger”.
Andrew Kinniburgh, defence director-general at manufacturing association Make UK, warned “the UK is losing valuable defence SMEs to overseas competitors.”
“The race to rearm across Europe and delays to the publication of the DIP have exacerbated this brain drain of talent,” he said. “SMEs in particular are at most risk because they lack the capital to sustain themselves during this period of paralysis, so they’re left in an impossible situation of either moving abroad or going bust.”
Talent flight hits war readiness
General Christopher Donahue, commander of the US Army in Europe and Africa, said this week at a war game in London that our “industry partners matter more than ever”, urging allies to “scale our industry and innovation in a way we haven’t needed since the end of the Cold War.”
A defence brain drain could leave the UK vulnerable at a moment of global insecurity, Taylor said.
“Defence SMEs are often where new ideas become real capability,” he said. “If they leave, the UK becomes more dependent on foreign suppliers, slower to respond, and less able to control cost, priority or availability in wartime.”
“Sovereign supply is about freedom of action. In peace, it means the UK can choose what to develop and how fast. In crisis, it means we are not at the back of someone else’s queue. In war, it means we can repair, modify, replenish and scale capability without asking permission.”
Mundell said that Ukraine has demonstrated “just how quickly a modern war burns through ammunition, missiles and equipment”.
“In a major conflict, Britain cannot afford to be overly reliant on foreign suppliers or global supply chains which may themselves come under pressure. Sovereign capability is about resilience in wartime, but also about protecting skilled jobs, industrial capacity and strategic freedom of action in peacetime,” he said.
Craven points to security concerns about equipment produced outside of the UK. “Do you really want Chinese chips in your command and control software when you’re fighting a ‘grey’ war against a peer adversary like the Chinese?” he said.
Government scrambles to respond
The Government announced this week that 13 British defence firms would be awarded contracts of up to £4m, in a move to boost investment in homegrown companies.
But Mundell said companies need “large, multi-year contracts that allow them to invest, scale production and retain talent with confidence”.
Whitehall is also set to unveil an £18bn uplift for defence. But military sources told The i Paper that while the money would be welcome and would help “keep the ships afloat”, it would not change the long-term picture for defence, largely because it is spread over four years.
Many defence industry figures are backing calls for the establishment of a Defence, Security and Resilience Bank, which would loan money to governments or firms making weapons, ammunition and other military supplies for Nato member states.
Healey said this week that the Government has signed more than 1,200 major defence contracts since 2024, with 86 per cent for British-based firms. His ministry is also in the process of creating five Defence Technical Excellence Colleges in Lincoln, Blackpool, Rotherham, Plymouth, and Yeovil.
The MoD plans to increase spending with SMEs by 50 per cent by May 2028 as part of the biggest uplift in defence spending since the Cold War, with £270bn investment across this Parliament.
In January, it also announced the Office for Small Business Growth, intended to transform how small businesses can bid for and win defence contracts and encourage private sector investment.
Healey re-emphasised the importance of boosting domestic defence companies, describing the industry as the key to repelling the rising threat from adversaries such as Vladimir Putin’s Russia.
“You know what deters them? The submarines we build at Barrow, the drones we build in Plymouth, the helicopters we build in Yeovil,” he said.
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