New research by global law firm White & Case reveals that UK defence companies and defence technology start-ups surveyed plan to invest £19.75bn over the next 12 months, amid the defence technology boom.
Average planned investment stands at £79 million, with more than a quarter (27%) of firms planning to invest over £100 million over the next 12 months and 67% expecting to invest between £50 million and £100 million. These investment plans are being driven by the need to maintain competitiveness (50%), demand for next-generation defence technology (42%), export opportunities (38%) and rising government defence spending (33%).
56% of UK defence companies plan to invest in defence technology over the next 12 months. Among those firms, 46% are investing to develop new technologies, while 44% are seeking to increase production capacity.
The new technologies being prioritised for increased investment reflect the changing nature of modern conflict. Cybersecurity and digital capabilities rank highest, prioritised by 46% of firms, followed closely by advanced sensors at 45% and space technologies at 39%. Air defence and counter-drone capabilities are the two leading applications for this technology, cited by 68% of firms.
97% of surveyed UK defence firms believe the UK is the leading European destination for defence technology investment. The UK’s position as a leading investment hub is also reflected in companies’ growth plans, with more than three quarters (76%) intending to expand in the UK over the next 12 months, ahead of Europe at 55%, the US at 27%, and the Middle East and APAC at 26% respectively.
Commenting, Patrick Sarch, Head of UK Public M&A at global law firm White & Case LLP, said:
“Defence technology is one of hottest and most strategically important sectors right now, as military expenditure soars and companies race to invest in and develop new technologies.
“It is particularly encouraging to see defence and defence tech companies confirm the UK as Europe’s leading destination for defence technology investment. 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.”
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