Webinar: Financing opportunities for businesses
UK aerospace and defence firms face mounting pressure to scale amid surging government spending pledges, yet persistent access-to-finance barriers threaten to choke supply-chain growth just as orders accelerate.
Key takeaways
- •The UK's Strategic Defence Review 2025 and Defence Industrial Strategy commit to raising defence spending towards 3% of GDP, creating urgent demand for R&D and production financing in the sector.
- •Delays in the Defence Investment Plan and ongoing supply-chain strains have already put some SMEs at risk, amplifying the need for accessible loans and equity to avoid bottlenecks in delivery.
- •Traditional lenders remain wary of defence due to regulatory and reputational complexities, forcing firms to navigate specialist schemes like British Business Bank offerings or risk missing out on multi-billion-pound procurement waves.
Financing Squeeze in Defence Surge
ADS Group, the trade association for UK aerospace, defence, security, and space, has long highlighted financing as a critical hurdle for its members, particularly SMEs that form the backbone of the supply chain. Recent collaborations, such as the Access to Finance Guide with UK Finance, aim to bridge gaps between defence firms and financial institutions wary of the sector's compliance burdens and perceived risks.
The context sharpened dramatically in 2025 with the Strategic Defence Review and Defence Industrial Strategy, which position defence as an engine for economic growth while committing to spending increases—reaching 2.6% of GDP by 2027 and aspiring to 3% thereafter. This shift follows lessons from Ukraine and heightened geopolitical tensions, prompting pledges for new capabilities in missiles, munitions, and innovation.
Yet the promised Defence Investment Plan, expected to detail procurement pipelines, has faced delays, leaving companies uncertain about contract timelines and volumes. Supply-chain fragility persists, with backlogs in commercial aerospace compounding pressures in defence. SMEs especially struggle to fund scaling, R&D, or working capital amid these uncertainties.
Non-obvious tensions include the mismatch between public-sector ambitions and private-finance caution: banks often exclude or heavily restrict defence lending due to export controls, ethical concerns, or volatility, even as government pushes for sovereign capability and rapid innovation. Initiatives like the British Business Bank target SMEs broadly but must address sector-specific barriers. ADS's own Finance Forum and papers on 'de-risking' defence seek to ease this, yet gaps remain—firms missing tailored loans risk losing ground to competitors or failing to meet NATO-aligned surge requirements.
Stakes are concrete: missed financing can delay delivery on £multi-billion programmes, erode industrial base resilience, and forfeit jobs in a sector employing around 443,000. With production ramps targeted for 2026 onward, inaction could widen capability shortfalls at a time when threats demand accelerated readiness.
Sources
- https://www.adsgroup.org.uk/events/webinar-financing-opportunities-for-businesses
- https://www.adsgroup.org.uk/events
- https://www.adsgroup.org.uk/services/finance-funding
- https://www.imeche.org/news/news-article/we-can-t-afford-this-level-of-delay-nathan-mathiot-from-ads-on-the-defence-investment-plan
- https://www.reuters.com/business/aerospace-defense/uks-bae-systems-posts-better-than-expected-12-profit-rise-2026-02-18
- https://www.gov.uk/government/publications/defence-industrial-strategy-2025-making-defence-an-engine-for-growth
- https://www.mfg-outlook.com/aerospace-defence-manufacturing/spotlight-ads-group