UK Budget 2025: government reconfirms defence spending increase

Andrew Brydon of Pinsent Masons was commenting after the government confirmed plans in its autumn budget to increase spending in line with announcements made earlier this year.

The UK currently spends 2.3% of UK GDP on defence and has ambitions to spend much more. This includes a historic commitment to spend 5% of GDP on national security by 2035, as referred to in the government’s industrial defence strategy (PDF 112 pages / 3.1GB), published in September.

In June, prime minister Sir Keir Starmer said the government planned to increase core defence spending to 3.5% of GDP by 2035, with a further 1.5% of GDP expenditure earmarked for “resilience and security”. The revised 5% national security spending commitment was announced as part of a NATO agreement which saw all 32 NATO nations agree to increase spending on national security to 5% by 2035.

Prior to the budget, there were expectations that UK chancellor Rachel Reeves would provide further details on defence spending. The chancellor did not provide additional clarity, but highlighted that the government was already “investing more in Portsmouth, Barrow and Plymouth”. Portsmouth, the main base for the Royal Navy's surface fleet, and Barrow-in-Furness, the sole site for the design and construction of all Royal Navy submarines, are critical hubs for the UK’s defence industry, while Plymouth is home to HMNB Devonport, the largest naval base in Western Europe.

All three locations have historically played an important role in the UK’s defence industry and were already identified as high-growth potential frontier industry clusters in the industrial defence strategy.

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The government already announced in a strategic defence review (144-page / 5.4MB PDF) in early June that it would increase defence spending to 2.6% of GDP by April 2027, with further potential to hit 3% of GDP by 2034 during the next parliament if economic conditions allowed. Sir Keir Starmer said it was “the largest sustained increase in defence spending since the end of the Cold War”.

At the time, the government indicated that the increase – which amounts to an £11bn annual increase in overall defence spending – would include, among other things, investing £4.5bn of public funds in munitions and munitions factories across the UK and more than £6bn on upgrading nuclear submarine production. The chancellor said then that the increases would partly be funded by cuts to the overseas aid budget. The Office for Budget Responsibility forecasts that the government’s longer-term commitment for defence spending to reach 3% of GDP by 2034 will cost an additional £32 billion in today’s money.

The review, led by Lord Robertson, a former UK defence secretary and NATO secretary general, also called for the UK to become a “leading tech-enabled defence power, with an integrated force that deters, fights, and wins through constant innovation at wartime pace”.

Commenting on the budget, Brydon, a defence specialist at Pinsent Masons, said: “The chancellor’s commitment to further investment in defence is a positive step, but it is clear that spending will need to grow significantly in the years ahead. As Sir Keir Starmer highlighted in the strategic defence review in June, the challenge we face on national security is a generational one. Meeting that challenge will require sustained investment and, inevitably, tough decisions elsewhere in the fiscal framework to ensure the resources are available.”

In a policy paper accompanying the budget, the government confirmed that it had already provided £5 billion in additional funding for defence since taking power in July 2024. It said the additional 2.6% of GDP earmarked for defence in 2027 would enable the armed forces to continue “to keep the country safe and support NATO allies”.

The government said that, so far, this has financed the deployment of a Royal Navy patrol ship and RAF P-8 maritime surveillance aircraft to monitor, track and deter a Russian spy ship; enabled the armed forces to join NATO air defence missions over Poland, and deploy specialist units to counter drone threats in Belgium. However, it did not specify what other UK defence systems were expected to benefit from increased funding in future. The government said the defence spending would also help support its role in the international “coalition of the willing” to push forward ongoing negotiations towards a just and lasting peace for Ukraine.

The paper also highlights steps the government is already taking to “increase collaboration and alignment between civil and defence nuclear”. These include exploring the consolidation of defence and civil nuclear regulatory functions. Earlier this week a regulatory review (PDF 162-pages/30.6MB) called for a ‘radical reset’ of the UK’s approach to nuclear regulation, including recommending the establishment of a single, unified decision-making body to act as a one-stop shop to oversee regulatory decisions in the sector.

Historically, the UK has had the second-largest defence budget among NATO nations, but this was overtaken by Germany in 2024. The UK spends a smaller proportion of its defence budget on personnel compared to many other countries and spends a sizeable amount on maintenance and upkeep of the nuclear deterrent. In 2023-24, around half of UK spending on defence equipment was on the nuclear deterrent, according to the Institute of Fiscal Studies.