
Industry Insights
2025 industry outlook: defence
31st January 2025
With a new Trump administration in the US and the UK Government’s forthcoming Spending Review, the defence landscape is set to evolve considerably in 2025. So what does this mean for SMEs in the manufacturing sector? Andrew Kinniburgh, Director General of Make UK Defence, shared his thoughts with Horizon Works.
We’re expecting some major changes in defence. What could the environment look like for UK SMEs this year?
If, as a result of the Spending Review, the Government commits to increasing defence spending to 2.5% of GDP, that will add around £10 billion to the defence budget. Half of that will probably be allocated to equipment and services, and the other half will be allocated to personnel. If a substantial amount can be allocated to SMEs, we should see more growth.
I think we’re likely to see some hard targets for UK SME spend from the MOD in the UK’s Defence Industrial Strategy – and I’d also like to see targets for the primes on SME spend too. I think the UK Government is more determined to buy British and is definitely more determined to spend more with SMEs. That is a good start, but we need to see that flowing through in terms of orders. Even if targets are put in place, it may take some time for opportunities to manifest for SMEs.
In terms of large programmes, the British Army’s infantry mobility vehicle fleet is being bolstered, and as AUKUS (the trilateral security partnership between Australia, the UK and the US) matures, more opportunities could arise in the supply chain.
What defence technology will be making the headlines as we move into 2025 and beyond?
Directed energy weapons will start to come of age. For example, the DragonFire laser directed energy weapon (LDEW) system is expected to be in service on Royal Navy ships within the next few years.
Counter-drone technology will also be a focus area – for instance the development of systems that can counter drone swarms.
And of course, AI will be important. It will play a key part in interpreting data from multiple sources, such as reconnaissance drones and armoured vehicles, and building a picture of the battlefield.
Do you have any advice for SMEs who wish to enter – or build their businesses – in the defence supply chain this year?
It’s really important to assess where you are in the supply chain, what tier are you in, and think about if you are actually engaging with the right companies. Businesses can make the mistake of always thinking they need to go directly to the primes, but they’ll often knock on the door and get no answer. That’s because they need to be talking to the mid-tier companies that are supplying the primes.
If you look at the mid-tier, companies such as Chemring Energetics, Cohort PLC, MSI Defence Systems and Oxley Group are very busy at the moment. There’s a lot of activity at that level.
Where will Make UK Defence’s focus be this year? Where will the priorities lie for the organisation?
The defence industrial strategy is hugely important for us and our priority is to make sure the SMEs and the mid-tiers get their voices heard very loudly and clearly.
On the policy side, we’ll be building a strong relationship with the new Defence Select Committee… and aiding their understanding of the world of SMEs and mid-tiers. We’ll also be working with the new All-Party Parliamentary Group for Defence Technology, which we expect will focus heavily on SMEs, as well as technology, and we’re recruiting a full-time policy specialist.
We’d also like to continue to increase our membership. Make UK Defence’s membership grew by around 23 per cent last year and we now have nearly 600 member companies. We’ve strengthened regionally to support this: Dan Parvaz is growing our presence in the North West and Helen Hastie, who joined us in 2024, is working across the East of England, while Stuart Tingley has recently been appointed as Membership Manager in the South East.
Are there any key events on the horizon?
We’ll be running the Make UK Defence: Meet The Buyer – Prime Contractors event at the second day of DPRTE in Farnborough, which takes place from 26th to 27th March.
Then in September, we’ll be running a 600 sqm stand at DSEI in London, where 60 Make UK Defence members will be exhibiting!
We’re also looking forward to the annual Make UK Defence Summit in November, which is growing year on year.
And we’re also delivering a full events programme throughout 2025, with member networking events across the UK, and regular webinars.
Make UK Defence is the UK’s leading trade association representing and supporting the defence supply chain. It champions the UK’s defence supply chain sector, representing its interests to the government and wider industry. For more information visit www.makeuk.org/defence