Policy head Nathan Mathiot tells Professional Engineering why continued uncertainty risks long-term damage to the UK’s industrial base.
Defence policy is increasingly judged on delivery, not intent. Where do you see the biggest gap today between UK defence ambition and what industry can realistically deliver?
It’s the gap between the year of strategies, as I call it, of 2025 into the year of delivery, we hope, in 2026. We’ve had the Modern Industrial Strategy, the Defence Industrial Strategy and the Strategic Defence Review. The government is very clear about strategic intent at this stage. What we haven’t yet seen is that translating into contracts, tenders and production – which is what really matters.
For industry to have the confidence to invest in building production capacity, it needs a clear, locked-in demand signal. We have this ambitious pathway that’s been sketched out by government – reaching 2.5% of GDP on defence by 2027, the commitment to reach 3% in the next parliament and a somewhat looser commitment to reach 3.5% by 2035, in line with a new Nato target. But what does that mean year on year? What does that mean in terms of the capabilities required, the materials, the timeframe? Details of how the policy framework translates into delivery are what industry is waiting for, and have been for some time.
When do you expect clarity to be given?
Hopefully, the next couple of months, but that is very much hearsay. The Defence Investment Plan – the central plan for what will be bought, in what quantities and by when – was promised in autumn 2025 but it has been encountering some delays, I should say not for a lack of hard work on the part of ministers and officials working away at this. There are some real challenges and trade-offs that need to be ironed out.
From an industrial perspective, businesses are really struggling with the void space we’ve entered, with a lack of contracts being issued. My understanding is that those should start to come through in the coming weeks and months. But the sooner, the better.
Around 95% of ADS members are SMEs. How can we ensure government engagement isn’t focused solely on primes (at the head of supply chains) but on the hundreds of small firms that make the supply chain work?
There’s a need to treat SMEs not just as subcontractors, but as actual partners in delivering capability. That means bringing them in earlier, before all the requirements have been set down in such a specified way that it’s hard to envisage what contribution you could make. We need to simplify the routes to entry for SMEs, and there needs to be prompt payment down through the supply chain.
The government has set out extensive plans for reforming procurement, and a defence office for small business growth has been established to help deliver the ambitious goal to increase annual SME spending by £2.5bn by 2028. We’re working closely with them on what that should look like.
There are questions over whether factory output can meet the intense pace and scale of modern defence demands. What constraints are limiting capacity?
Skills, absolutely. Two-thirds of members in our most recent survey said that workforce shortages are having a significant impact on their growth opportunities – with a lack of welders, electricians and maintenance technicians in particular.
If defence spending by 2035 is uplifted to 3%, we could see 50,000 more jobs needed in the sector. That rises to 85,000 jobs at 3.5%. That’s from a baseline today of 181,500. So, as a proportion, a significant additional employment opportunity. Defence employment has risen by nearly a third over the last decade, but with around 10,000 unfilled vacancies across the defence supply chain today, talent availability remains the primary concern.
Access to finance is a big challenge, and I don’t mean the Defence Investment Plan in that sense – though that is a critical aspect, because capital follows contract. We’re hearing a lot about the impact the delay in issuing contracts is having on defence businesses and their ability to secure high-street finance. We’re working closely with the finance sector to try to address that.
Something not often spoken about is the lack of test and evaluation facilities across the UK. That has become a real pinch point. These facilities are vital for new entrants to demonstrate that the capability they’re offering is up to spec.
What single action could government take to improve the credibility, speed and resilience of defence delivery, and what’s the risk if current inertia continues?
Unquestionably, it’s clarity on the Defence Investment Plan. Industry needs that certainty and the financial security that billions of additional government investment would bring. The good intentions and goodwill are all appreciated, but any further delays are frustrating at best, but actively disruptive at worst. We’ve not seen any new orders despite the big headlines.
The risk is that, from an SME perspective, we’ve got businesses left contractless and burning cash to stay afloat. Short term, there is a very real risk of businesses going under. The long-term threat is the UK’s attractiveness as an investment destination when companies weigh up where to locate production, R&D and so on. We simply can’t afford to see this level of delay continue further.
Want the best engineering stories delivered straight to your inbox? The Professional Engineering newsletter gives you vital updates on the most cutting-edge engineering and exciting new job opportunities. To sign up, click here.
Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.