Speaking three days after the US and Israel launched strikes on Iran, Stephen Phipson CBE urged the government to announce a roadmap for the increased spending by this summer, arguing that a 2035 timeframe for spending 3.5% of GDP on defence – topped up by another 1.5% spending on related topics, including protecting critical infrastructure – is too slow.
“Defence spending is a key driver and accelerator of growth and provider of high skills, especially in areas of the UK that need to see them,” Phipson said at the Make UK National Manufacturing Conference at the QE2 Centre in Westminster today (3 March).
“The much-delayed Defence Investment Plan is already damaging confidence in the sector, delaying investments and the provision of private capital. This must be announced as soon as possible whilst, at the same time, government must explore alternative financial options to boost defence spending.
“The prime minister was right, at the Munich [Security] Conference recently, to also commit to working with European partners on joint procurement to help build its defence industrial base. European countries spent £380bn on defence in 2025 and are increasing spend rapidly, yet less than one fifth of procurement is conducted jointly.”
Phipson also urged the government to accelerate work to achieve targets from last year’s Industrial Strategy, and to announce an extension of the proposed business energy support scheme across the whole sector, which he said should be introduced before 2027. The recommendations formed part of a wider call for a “new national strategy for resilience”, combining both economic and defence security.
“The ongoing uncertainty created by yet another announcement on tariffs last week is a prime example of this turbulence as we head towards a new world order. To date, the government has done well to walk a delicate political tightrope in a complex environment between maintaining relations with the US, seeking to improve relations with the EU and restoring a more positive relationship with China. All of these are critical for our trade and prosperity, and we are working closely with government to maintain all our trading relationships,” he said.
“It’s especially important to reset our relationship with the EU. This is not just a matter simply of removing trade barriers, but ensuring that we have a positive and mutually beneficial relationship at all levels.
“The world has shifted on its axis, and government and business must be vocal in explaining why this matters for growth and jobs. We must increase the pace of delivering the change the government promised. In particular, the government stated that growth would be its number one mission, but we have yet to see evidence of the dial being shifted. As a result, business needs to see the prime minister and chancellor being far bolder in the government’s economic ambitions.”
On the need for faster delivery of the Industrial Strategy, he said: “This is one of the most important commitments the government has made, and is key to boosting economic growth at national and regional level. Yet, while there has been progress in some areas, some departments are moving faster than others, and there is a danger that it is misfiring at a time when companies need to see evidence that government is putting its foot on the accelerator.
“To step up the pace, it’s now essential that the Industrial Strategy Advisory Council is given a stronger role in holding government to account and reporting back on progress and delivery. This will help ensure that the UK takes its place in the fast lane when it comes to attracting domestic and overseas investment.”
He also warned of “condemning a young generation of people”, due to issues with the Apprenticeship Levy. “There is more than £1bn of revenue raised from businesses for skills, which is not being used to support employer investment in training, effectively hitting business with an extra tax. By the summer, government should commit to ringfencing the funding for the Growth and Skills Levy and Immigration Skills Charge, creating thousands of new apprentice starts,” he said.
“Many of you will remember when industry was told that the Apprenticeship Levy would be a win-win for those that were investing in apprenticeships. Yet here we are, 10 years later, with starts in manufacturing down 40% – whilst, shockingly, we have almost 1 million young people not in education, employment or training. That’s a lose-lose situation, which is in danger of condemning a generation of young people, which we cannot allow to happen.
“We stand ready to work with government as a sector to help offer a solution to this problem, which will give young people tremendous career opportunities.”
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