Small businesses to benefit from defence spending increase in boost for Armed Forces supply chain

Thousands of small businesses in the UK will receive new government support to ensure they benefit from the historic decision to increase defence spending to 2.5% of GDP.

The Ministry of Defence will also launch a new "hub" for small and medium sized enterprises (SMEs) to direct them towards defence contracts.

Prime Minister Keir Starmer said: "The UK's defence industry is a source of national pride. It supports hundreds of thousands of good jobs up and down the country and represents British manufacturing at its best."

This comes as Sir Keir said "we are at a crossroads in history" after meeting with European leaders on Sunday.

Sir Keir also announced a new deal allowing Ukraine to use £1.6 billion of UK export finance to buy 5,000 air defence missiles.

Some 12,000 SMEs could be supported by the plans, the Ministry of Defence said.

"Increasing our investment in defence is not only bolstering our national security, it is an opportunity to put more money into working people's pockets and boost economic growth.

"By helping smaller businesses to access this money, we're making communities across the UK better off and opening up more opportunities to train for good, skilled, productive jobs," Sir Keir said.

70% of defence spending is outside the wealthy south east of England and London but ministers say only a small amount of this went to SMEs last year, and plan to change this.

Defence Secretary John Healey said: "This Government's historic increase in defence spending to 2.5% of GDP by April 2027 will boost national security and make defence an engine for economic growth throughout the UK.

"For too long small businesses felt locked out of defence but we've listened and we're acting. Today's announcement will ensure that smaller firms benefit from increased defence spending, attracting new suppliers and fast-tracking the technologies of the future into the hands of our Armed Forces.

"This a new era for defence and we will ensure it plays the fullest part in our national economic growth."

Meanwhile the UK has secured a landmark £1.6 billion deal to supply Ukraine with more than 5,000 air defence missiles, reinforcing Britain’s commitment to supporting Kyiv’s fight against Russian aggression.

Announcing the agreement on Sunday, Sir Keir Starmer confirmed that the lightweight multirole missiles (LMM) will be produced in Northern Ireland, creating 200 additional defence jobs at the Thales weapons plant in Belfast.

“This will be vital for protecting critical infrastructure now and strengthening Ukraine in securing the peace when it comes—because we have to learn from the mistakes of the past,” Starmer said.

The missiles, capable of travelling at 1.5 times the speed of sound and striking targets over 6km away, are designed to take down enemy vehicles, boats, and drones.

The move comes after an angry public clash between Donald Trump and Volodymyr Zelensky in the White House, which saw the Ukrainian president leave the USA early.

Earlier the Prime Minister said European leaders must realise it is "time to act" as he hosted a security summit focused on supporting Ukraine.

Volodymyr Zelenskyy was among those to join Sir Keir Starmer in London for the event.