Finance chiefs have called on the Government to help banks and pension funds support the defence industry by setting out its long-term arms investment plans.
Whitehall has been urged to produce a 10-year outlook revealing its intentions for equipment procurement and how much it expects to spend on certain capabilities.
In its strategic defence review, the Government committed to completing an investment plan by autumn this year.
A report published on Tuesday by a taskforce led by the CBI and chaired by Chancellor Rachel Reeves and Defence Secretary John Healey says “substantially improved visibility is a prerequisite to generating accelerated investment in the sector”.
It recommends the investment plan clearly outline what the Government intends to buy, when it intends to buy it and how much it intends to spend in order to strengthen the “demand signal” to the market.
Meanwhile, City firms should review their “due diligence” exclusions relating to defence to help unlock new approaches to financing and investment, the report says.
UK banks, pension funds, investment managers and asset owners should “take action now” in order to seize “a clear opportunity and need for Government and private sector to work together” to explore service delivery options, the report says.
The taskforce has also endorsed proposals for a new bank – the Defence, Security and Resilience Bank – that could act as a London-based lender designed to channel capital quickly into allied defence projects.
“London is a world-leading financial services hub, home to the largest banks and asset managers… This should be leveraged to position London as an international hub for defence and dual-use financing and investment,” it says.
“This hub will create the conditions to encourage innovative investment approaches into defence and could foster initiatives such as the Defence, Security and Resilience Bank.”
Allies could take part in an international conference involving finance chiefs and Government stakeholders as the “next step” towards establishing such a bank, the report says.
The taskforce brings together executives from across the defence and finance industries including BAE Systems, Babcock International, Barclays, M&G, Phoenix Group, Lloyds and HSBC.
Its recommendations will be launched at a roundtable meeting chaired by the Chancellor and Defence Secretary later on Tuesday, the Government said.
Britain, along with other Nato allies, has signed up to spend 3.5% of economic output on core defence by 2035 following calls from US President Donald Trump for members to shoulder more of the burden of European security.
Another 1.5% would be spent on security and resilience measures under the plans.
The strategic defence review published earlier this year sets out Government plans for a mix of conventional and digital warfighters including drones, AI, tanks and artillery.
Financial experts have said the private sector will play a critical role in delivering its objectives.
Ms Reeves said: “A new era of threats demands a new era for defence and security. That’s why we took the decision to prioritise defence spending, increasing it to 2.6% of GDP by April 2027.”
She said that through the taskforce, the Government was “securing our nation and unleashing the economic potential in the defence sector, benefiting working people across the UK through our Plan for Change.”
Mr Healey said the Government’s partnership with investors and industry was part of plans to make defence an “engine for economic growth” as he welcomed the taskforce report.
CBI chief executive Rain Newton Smith said: “We live in a precarious world where our peace and security is being tested. Enhancing our national security is vital, and the Government’s commitment to higher defence spending is a key part of this.
“But at the same time, we must ensure this additional spending supports the UK’s growth mission with lasting impact on our productivity and innovation.”
Lisa Quest, managing partner at the Oliver Wyman consultancy firm that co-led the report with the CBI, said that the private sector had a “crucial” role to play in boosting growth and ensuring the UK’s resilience.
“Crucial to the success of this initiative is the alignment of private sector spending throughout the entire supply chain to unlock the accelerated flow of capital,” she said.
The Government says it has already started work on three of the report’s recommendations: establishing an SME hub to provide support to new market entrants, a “defence exports office” in the Ministry of Defence and “defence growth deals” across the country aimed at supporting regional industrial clusters.
Among its other proposals is that Sir Keir Starmer lead a renewed “national conversation” about defence bringing together voices from academia, industry and other stakeholders as part of what it refers to as a cross-sector “Team UK” strategy to ensure Britain is globally competitive.
It also recommends prioritising investment in “dual use” technologies that can be used for both civil and military purposes in the UK.
The remaining recommendations will now be worked through across Whitehall ahead of the forthcoming launch of the defence industrial strategy.
Tuesday’s meeting comes as defence tech company Helsing announced that it would open a UK-based facility to provide allies navies with AI-powered miniature submarines this year, which ministers say will help create specialist jobs and boost the economy.
The £350 million Trinity House private investment will help to protect critical underwater infrastructure and be located in Plymouth, the Government said.
