UK arms makers sound alarm over orders as spending fears mount

UK defence firms are at their most downbeat in two decades despite promises of a boost in funding, The Mail on Sunday has been told.

Businesses in the sector are worried about a lack of orders domestically, following reports of a £28 billion hole in the Government’s spending plans.

They are also concerned by a delay in Labour’s investment plan – fleshing out its commitment to raise the defence budget to 2.5 per cent of economic output, or gross domestic product (GDP).

Many had hoped for the plans to be released by the end of 2025. Some think it will now happen in March.

A senior defence source said: ‘The domestic environment for small UK defence businesses is the worst I’ve seen for 20 years – even the bigger ones are deeply frustrated.’

Tory defence spokesman James Cartlidge said it was the ‘direct result of Starmer’s decision to prioritise higher welfare spending over properly funding defence’.

Under fire: The UK’s problematic Ajax armoured vehicle project is one of the investments that is now in doubt

It represents an alarming gap between rhetoric about defence and the reality experienced by firms. Some fear that spending faces being ‘cut to the bone’ with key programmes being axed.

It comes after Air Chief Marshal Sir Richard Knighton reportedly warned the Prime Minister last month that the Ministry of Defence was short of £28 billion over the next four years. The report suggested Knighton, chief of the defence staff, issued the warning at a meeting before Christmas that was also attended by Defence Secretary John Healey and Chancellor Rachel Reeves.

Hopes had been raised that the Government’s strategic defence review last year would deliver a fillip to the industry. While some have been helped by £20 billion in export deals last year, others are worried about a shortage of orders from the UK. Some firms have had to turn to non-defence work. Even when the plan is finally unveiled the extra spending will not kick in until 2027.

The unease will also raise speculation about which key defence programmes may be axed.

In the past, fears have centred on the £12 billion Tempest fighter jet – though withdrawing from this multinational project involving Italy and Japan might be hard.

The ill-fated Ajax armoured vehicle – in doubt after soldiers fell ill from noise and vibration in exercises – is likely to be in focus. Elsewhere, the MoD is dragging its feet over a £1 billion helicopter contract to replace Britain’s ageing Puma fleet – even though Italian defence giant Leonardo is the sole bidder after rivals pulled out.

The MoD said: ‘We’ve signed over 1,000 major defence contracts since the Election and 2025 was the best year for UK defence exports since records began. This month we’ll launch a dedicated defence office for small business growth and will raise spending on SMEs by £2.5 billion by May 2028.’