Defence commitment boosts industry response to spring statement

Spokespeople for several of the key sector bodies offered a broadly encouraging response, in contrast to concerns expressed over last year’s autumn statement increases in national insurance costs.

Some warned, however, of the difficult spending priorities ahead for government and the likely need for increased investment to protect critical national industries.

To read the 2025 spring statement click here.

There was a disappointing revised Office of Budget Responsibility (OBR) growth forecast for the year, that saw predictions halve from 2% to 1% growth. However, its forecasts for the years 2026-2029 inclusive have all been revised upwards.

Also likely to please industry is the c£1 billion in employment support, plus £400 million jobcentre funding.

Additionally welcome is the planned rise in defence spend to 2.5% by the April 2027 tax year. This includes targeted funds to boost innovation and overhaul the much-criticised defence procurement system.

But there was concern to see more investment in recruitment pipelines and training in order to ensure sufficient skilled people were available.

Early responses from industry bodies included the following:

Head of policy at the Institution of Engineering and Technology (IET) Stephanie Baxter: "We welcome the launch of UK Defence Innovation along with record investment in defence manufacturing to make the UK a defence industrial superpower. The £400 million committed to the development and deployment of new technologies, including quantum and AI, has huge potential for the development of ground-breaking innovations in engineering and technology which can benefit the whole economy and wider society.

"However, we will not be able to become a secure, sustainable and resilient defence industrial superpower without the highly skilled engineers and technologists who underpin the advanced manufacturing base. That is why it is critical that government also invests in the skills training and systems.”

Mike Thornton RSM head of industrials: “The focus on defence spending here in the UK and across Europe presents a real opportunity for manufacturers and it’s great to see a further £2 billion of support for exporters earmarked through UK Export Finance. It was also welcome news to see defence spending ring-fenced for novel and innovative technologies – this will support advanced manufacturing and look to capitalise on our competitive advantage.

“However, what is needed to underpin this growth is the long-awaited detail of the industrial strategy, setting out a comprehensive plan to support both advanced manufacturing and defence. Many would have been hoping that more details would have been published alongside today’s Spring Statement.”

Stephen Phipson, CEO of Make UK: “Industry will welcome and support the Chancellor’s focus on maintaining economic stability and, increases in infrastructure and defence investment but, it is clear the Chancellor will continue to face difficult spending choices amid the likelihood that investment in defence and security will have to rise further given the scale of threats we face.”

CEO and co-founder of technology startup FourJaw Manufacturing Analytics, Chris Iveson: “We need to see what the proposed defence procurement changes look like, but anything that improves the ability of UK manufacturers to secure contracts with the MoD should be welcomed.

“Investments made by UK manufacturers in new technologies such as AI, automation, and analytics since the pandemic mean they are in a better place than ever to compete on cost and quality with locations that depend on cheap labour.”

Jonathan Hardinges, Chief Strategy Officer of London-listed GlobalData pLC, a data analytics consultancy

“In the past year, AI has been the cornerstone of digital transformation in businesses globally across all sectors - from retail to mining, from pharma to healthcare and more. There’s been increasing global competition, with Europe finding its footing amidst Stargate Vs DeepSeek battle of the AI. And meanwhile, UK businesses must start acting, instead of holding their breath for more bad news - whilst the rest of the world continues to innovate.” 

Meanwhile, Beatrice Barleon, head of policy and public affairs at EngineeringUK called on the Government to go further in the spending review and autumn budget later this year and look to address barriers to technical and vocational entry routes into engineering and technology for young people.

 She called for a new model of directly funding apprenticeships for 16- to 18-year-olds to help reverse the decline in uptake of apprenticeships.

“Government must also look to invest in programmes and activities we know work in getting young people interested in careers in engineering & technology, and support the teachers that will help deliver them<” said Barleon.

“The investment in training announced is a positive step in the right direction, but this action needs to be replicated through investment across the full STEM skills pipeline.”

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