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Unlocking the defence opportunity
The UK government’s industrial strategy on defence and advanced manufacturing.
Read time: 5 mins Added: 12/03/26
Speakers from the recent defence and advanced manufacturing event as part of the CBI Industrial Strategy Roadshow discuss the key outputs and the arising opportunities in the sector.
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Huw Howells, Managing Director, Head of Manufacturing and Industrials, Corporate and Institutional Coverage, Lloyds:
Defence and advanced manufacturing are at the heart of the UK's industrial strategy. They are high growth sectors with large opportunity for the UK.
Dave Atkinson, Head of Manufacturing, Business and Commercial Banking, Lloyds:
I think the UK's push to reshore supply chains is absolutely going to create opportunities for SMEs. Linking in with institutions like Make UK Defence and the MTC can all help get them ready to spot and be prepared to take advantage of those opportunities that will undoubtedly start to emerge.
James Neely, Strategic Partnerships Director, Defence and Space, NCC:
It's really important that we are able to create strong supply chains in the UK, and that's why here at NCC we work with over 300 SMEs a year to help them grow as organisations in order to deliver impact for the UK.
Dave Atkinson:
For SMEs not currently in defence and looking to take advantage of that opportunity, some of the things that they can do to help themselves get ready for that is linking with institutions like Make UK Defence and the MTC, and they can help align their capabilities with the opportunities that the primes are going to need the support in.
Jordan Cummins, Uk Competitiveness Director, CBI:
The UK has a very strong industrial base in advanced manufacturing and actually in the South West, defence plays a quite central role to that. And so the larger the kind of supply and value chain for advanced manufacturing, the more export opportunity we have, the more export opportunity we have, the more resilient we can become as an economy.
Huw Howells:
Advanced manufacturing contributes over 82 billion pounds worth of GVA to the UK. Defence is very important for the UK, not just from a security perspective, but as an economic growth engine.
To drive growth across the South West, Lloyds must continue to support all of the regional clusters and provide targeted financial support.
James Neely:
It’s clear that no single organisation can solve the problems that UK defence faces alone. We need to work together and that's government, that's industry, that's academia, and that's research organisations like the NCC.
Jordan Cummins:
So it's not a given that big Whitehall strategies convert automatically into growth. You've got to work hard at it and you've got to work hard at it from the top. But you definitely got to work hard at it from the bottom. And that means regional structures are really important, political and economic.
When we look forward into the success of the Industrial Strategy, if we don't have those structures in place, it will be very hard for us to link the top to the bottom. That's why we're doing the roadshow, that's why we're doing it in every region, with every IS8 sector.
With strong government backing for defence and advanced manufacturing, the CBI and Lloyds convened business leaders, policymakers and regional voices to explore how these sectors can create opportunities across the UK. At an event held at the National Composites Centre in Bristol, forming part of the wider Industrial Strategy Roadshow, one message stood out clearly: the opportunity is significant, but real progress will require far closer collaboration between industry, finance, government and academia.
A new approach
The Defence Industrial Strategy, published in September 2025, marked a fundamental shift from traditional customer-supplier relationships to genuine strategic partnerships with industry. This is a welcome change, giving businesses real input into how the strategy's 77 deliverables are achieved, rather than simply responding to predetermined requirements. This flexibility allows regions to set priorities and shape investment around existing capabilities.
The scale of opportunity is clear. Defence and advanced manufacturing employ over 400,000 people across the UK, with almost 70% of jobs outside London and the South East. But speakers stressed that successful delivery depends on true collaboration: business leaders need clearer demand signals to justify investment, while government needs honest feedback on what's achievable and what support is required.
A key discussion point was the untapped potential of SMEs in manufacturing. Although 97% of UK manufacturing is non‑defence, many of these businesses have skills that could be applied to defence. The real challenge is helping them understand supply‑chain needs and making it easier for them to adapt.
Unlocking dual-use potential
Recent years have highlighted the importance of being able to scale manufacturing quickly when required. The ability to scale production and pivot between commercial and defence work is now seen as essential to supply chain resilience and national security. But for many SMEs, the barriers to entry remain high.
Panellists outlined practical steps to address this. Technology and innovation centres are expanding defence-focused facilities, including secure sites that allow companies to explore defence applications without major upfront investment. Government representatives stressed their commitment to being more accessible and encouraged businesses to engage directly with specialist teams. Better regional supply chain mapping is essential, understanding local capabilities and creating clearer routes for businesses to match what they can offer to defence needs.
Regional strengths ready to scale
The discussion highlighted how defence capability exists across all UK regions. The South West has marine autonomy in Plymouth, aerospace and composites in Bristol, and naval engineering in Devonport. South Yorkshire has advanced materials and specialist steel. Wales is developing UAV (unmanned aerial vehicle) capabilities. Scotland has shipbuilding and space. Northern Ireland has cyber innovation.
Each region has an innovation ecosystem connecting universities, technology centres and industry. But regional leaders emphasised that industrial capability alone isn't enough. To attract and retain the necessary talent, regions must address housing affordability, infrastructure and quality of life.
Government representatives explained that Defence Growth Deals - worth £250 million over 4 years - are designed to address this, bringing together national and local government, business and academia across five regions.
The skills imperative
Making it happen
Another key theme from the discussion was the shift from policy to action. Government representatives emphasised that their teams are accessible and want direct feedback when barriers arise. The creation of the Office for Exports, backed by £3 billion in export finance, signals that international markets are now central to defence growth.
For SMEs particularly, the focus is on making engagement easier - through technology centre facilities, clearer procurement pathways, or better supply chain visibility. At Lloyds, we're supporting this through partnerships with organisations like Make UK and the Manufacturing Technology Centre, helping manufacturers access defence supply chains and finance the capabilities they need to compete.
Our latest Business Barometer shows manufacturing confidence rising, with a five-point increase at the end of 2025. In 2026, we'll make over £35 billion of new finance available to companies operating and investing in the UK, across all sectors, including £9.5 billion specifically for SMEs.
The strategy is in place, and the commitment is clear. Now it's about delivery - ensuring businesses of all sizes across all regions can access the opportunities this defence investment can unlock.
Thank you to everyone who attended and contributed to this important discussion.
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Any views, opinions or forecasts expressed in this document represent views or opinions of forum participants and are not intended to be, and should not be viewed as advice or a recommendation from Lloyds Bank or any other party.