Foreign defence contractors will need to invest in UK under new rules

Foreign defence contractors will need to invest in UK under new rules

The government says overseas defence procurement will have to be matched by British investment in jobs, industry and skills.

Foreign companies winning major defence contracts will be required to put an equal amount back into the UK, in what Defence Secretary Wes Streeting described as creating "bang for the British buck".

Under the new policy, firms awarded contracts worth more than £50m will have to spend the same value on British factories, jobs and training.

The move comes as the government remains under pressure to meet its goal of spending 3% of GDP on defence by 2030, a target some opposition MPs and defence analysts have questioned it can achieve.

Streeting told BBC Breakfast the new rules would help deliver that aim, saying it "does come at a cost to the country and other things we'd like to spend money on".

"What we're aiming to do is on the most valuable of those contracts worth £50m or more, is to try and get benefit for Britain, bang for the British buck back here at home," he added.

The investment requirements for foreign firms, which the government called its "offset strategy", are intended to boost investment in Britain's defence sector.

The Ministry of Defence will introduce the rules on a "case-by-case" basis from April 2027, the government said in a statement.

The statement said countries including Poland, Norway and the Netherlands have introduced similar rules to "boost the economic benefit from defence procurement".

It added: "The government is prioritising buying British defence contracts wherever possible.

"Where it must buy defence equipment from overseas, this new approach will ensure British workers and businesses still benefit."

Streeting and Chancellor John Healey will announce the new rules during a visit to BAE's shipbuilding site in Glasgow.

The policy seems aimed at making the planned extra defence investment more politically acceptable, rather than committing to immediate direct cuts and spending increases.

It comes as disagreement continues over how the government will meet its defence spending targets while public finances remain tight.

Tan Dhesi, Labour chair of the Commons defence select Committee, said key decisions had been "lamentably delayed" until next year's spending review instead of being announced in Wednesday's Budget.

"We need to urgently rebuild our capabilities now, or we risk leaving ourselves seriously vulnerable in the event of a major conflict," the MP said.

Tory leader Kemi Badenoch said on Wednesday that Healey "failed his own test" by not setting out a "plan for 3%" in the Budget.

Streeting rejected the criticism, saying he "strongly disagrees" with Dhesi and insisting the government was not "kicking the can down" the road on defence, as critics claim.

"I think we're doing as much as we can, as fast as we can... of course there is more to do," he told BBC Breakfast.

He said postponing detail on reaching the 3% target until next year's spending review was "the right thing to do" so ministers can examine "spending in the round".

He added that the UK was prepared to face hostile threats, but "we're not where we'd want to be".

"There's no sugarcoating the fact that our Armed Forces were under-invested in for more than a decade," he told Breakfast.

Some estimates have suggested the government will need to spend an extra £10bn a year to reach its 3% target by the end of the decade, and to match the Nato-wide commitment of spending 3.5% of national income by 2035.

Healey resigned as Sir Keir Starmer's defence secretary in June, saying at the time that the former prime minister's proposed defence investment fell "well short of what is required for defence and the country at this dangerous time".