How defence can lead growth through private investment
The UK’s Strategic Defence Review outlines ambitious long-term reforms, but by leveraging its strengths in finance, AI, and commercial shipping, Britain can achieve rapid defence innovation and capability gains without immediate major spending increases, says Julien de Saint-Quentin
The Strategic Defence Review (SDR), published last week, was presented as a ‘transformative’, ‘once-in a generation’ exercise. The recommendations present a blueprint for the future of UK defence, but whether these happen in reality – and if so, when – is dependent on His Majesty’s (HM) Government’s spending commitments.
Britain is preparing to hear the government’s plan for growth, set to be unveiled this week in the Spending Review by Chancellor Rachel Reeves. Given the competing priorities facing the government, there is a case for deploying Britain’s unique competitive advantages to achieve rapid results. Behind the eye-catching headlines and figures of the SDR last week, three particular measures have the potential to deliver outcomes, without requiring long-term fiscal consolidation.
Innovation is not only technical – it is also financial
The Ministry of Defence (MOD) has pledged to develop a strategy for the financial services by March 2026. Plans to establish a Defence Investors’ Advisory Group, made up of venture capital and private equity firms, may harness investors’ renewed appetite for defence investment, supporting dual-use technologies and helping small and medium enterprises (SMEs) to scale up for domestic benefit and export markets opportunities. This initiative will encourage innovation in new areas, traditionally outweighed by capital projects.
It is important, however, that traditional barriers to entry do not deter private investors used to shorter commercial negotiations. Protracted contracting processes and complex regulations are barriers acknowledged by the SDR. When fully implemented, the Defence Investors’ Advisory Group will help develop greater understanding and cooperation between the MOD and private investors.
Autonomous vessels: the most immediate opportunity?
The autonomous systems market is both more mature than many think, but still very fragmented. Manufacturers large and small, established and new entrants, are offering different solutions, leading to big choices. But there is little hesitation: every Western navy recognises that the numbers battle cannot be won by large, expensive, polyvalent, manned platforms alone. The new strategic environment, especially in the North Atlantic, demands that these be complemented by an even greater number of unmanned platforms, able to carry the ‘dull, dangerous or dirty’.
In order to progress from the experimental stage to full deployment, the MOD must promote standardisation and commit to long-term contracts. The first phase of the ‘Atlantic Net’ programme, published days before the SDR, calls for a Commercially Owned, Commercially Operated, Navy Oversight (COCONO) setup, spanning an impressive five years — an unprecedented duration, even internationally. This is a golden opportunity to attract private investment and consolidate industrial capacity. If successful, the initiative could redefine defence procurement and create an exportable model for allied nations.
Commercial shipping – a strategic move
The SDR calls for the Royal Fleet Auxiliary (RFA) to be augmented with commercial vessels, such as Strategic Sealift and Fleet Solid Support ship, for operations in non-contested environments. This will allow the MOD to reallocate resources toward the higher end of the spectrum, strengthening the UK’s warfighting capabilities without overstretching its budget.
However, this move carries risks. European shipyards frequently face production bottlenecks, and the UK continues to struggle with a shortage of merchant mariners. Rising inflation and fragile supply chains are also inflating maintenance costs.
These challenges all operate on different timescales. To manage them effectively, the MOD must strike a careful balance: balance long-term capital investment (typically spanning 20-30 years) with shorter crewing and maintenance strategies (five–seven years).
Leveraging the UK’s unique competitive advantages
Most of the SDR outlines an agenda spanning decades, from frigate newbuilds to the nuclear enterprise, requiring substantial budget increases and arbitrage. But the UK is a global financial powerhouse and a European leader in Artificial Intelligence. It is also the world’s leading hub for commercial shipping. By making the best use of these three competitive advantages, it can reap benefits in years if not months, helping to bridge between urgent strategic imperatives and complex fiscal realities.
Julien de Saint-Quentin was a senior officer in the French Navy for 27 years. As a strategy advisor to the First Sea Lord (2012-2015) and the Head of the French Navy (2016-2020), as well as a naval attaché in London (2020-2023), he was responsible for contributing to and commenting on several French and UK Defence Reviews.