‘De-risk defence’ to improve financing climate for defence sector
- New collaborative paper from leading industry bodies sets out clear priorities to enhance the financing environment for defence sector businesses
- It calls on government to develop mechanisms that reduce perceived risks in the defence industry for finance and investment communities
- UK defence sector productivity has increased 17% in the last decade, providing 164,000 jobs.
TheCityUK and ADS have today released a landmark paper setting out how greater private-public cooperation can de-risk defence and enable the businesses responsible for UK security to access the financial and related professional services required to grow and thrive. The industry bodies are committed to improving knowledge sharing among the defence, financial and related professional services industry, government, and regulators to enhance the UK defence supply chain.
The paper, ‘Finance and investment for UK defence’, contains recommendations to ensure alignment between government objectives and the defence and financial and related professional services industries. Ahead of the publication of the government’s Industrial Strategy, Strategic Defence Review and Defence Industrial Strategy, the two organisations are keen to ensure the strengths of both industries are harnessed to deliver their true value to the UK economy.
The key recommendations are centered around delivering capital-backed innovation, including through:
- Addressing procurement challenges that hinder cashflow and make investment in defence businesses riskier for finance providers.
- Government, regulators, and industry working together to reduce duplicate due diligence checks for MoD-approved SMEs
- Regulators proactively reassuring industry that sustainability rules do not prevent investment in or finance for defence companies.
- A new Guarantee Scheme for Defence, which would help companies access finance that is currently hard to obtain. Similar to the British Business Bank or UK Export Finance programmes, the guarantee would ultimately make lenders more comfortable with uncertain cashflows.
Commenting on the report, Kevin Craven, Chief Executive, ADS, said: “Financing challenges for SMEs and scale-ups in the defence supply chain need addressing to ensure cashflow, investment opportunities, and resilience, which is essential for innovation and economic spillovers.
“Working in collaboration with TheCityUK, and in line with ADS’ wider access to finance programme, it’s clear that businesses in both defence and financial services have similar frustrations with existing conditions. We hope that through continued engagement with regulators, financial service providers and with defence businesses themselves, we can continue to build a brighter investment future for the defence sector which delivers £12 billion to the UK economy.
Miles Celic OBE, Chief Executive Officer, TheCityUK, said: “The UK’s defence and security businesses face a number of challenges that don’t arise in other areas of public-private partnership. There is now both an opportunity and pressing need to maximise the contribution of private finance and investment to support UK defence and security businesses.
"Our industry is committed to working together with the defence industry, government, and regulators to develop mechanisms that can help de-risk the industry for the finance and investment community."
ENDS.