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Rising Defence Budgets in the UK and France: What Businesses Need to Know

Article written by Gaspard Lucas, Policy and Advocacy Intern at the French Chamber of Great Britain

Defence has returned to the heart of the political and economic agenda in Europe. Russia’s invasion of Ukraine, instability in the Indo-Pacific, and the rise of hybrid threats have forced governments to rethink the way they fund their armed forces. For the United Kingdom and France, NATO’s two European nuclear powers and long-standing defence partners, this is not only about preparing for war. Defence spending has become a tool for industrial strategy, technological leadership, and economic resilience.

For businesses, this shift opens both risks and opportunities. Understanding where the money is flowing, how governments are linking defence with industrial growth, and what renewed Franco-British cooperation means is now essential.

The UK’s New Defence Trajectory

The UK has embarked on its most ambitious defence investment programme in decades. According to the Ministry of Defence’s Strategic Defence Review 2025, spending will rise to £87 billion in 2025 and is projected to hit £100 billion by 2030. While London has not yet signed up to NATO’s new target of 3.5% of GDP for defence by 2032, it has reaffirmed its ambition to reach 2.5% by the end of the decade.

What matters most is not just the size of the budget, but where it is going. The 2025 Review marked a clear pivot from long-term modernisation towards immediate warfighting capability. Priorities include long-range precision strike, autonomous drones, cyber resilience, and nuclear deterrence. Munitions production is particularly central: six new ammunition plants have been announced, and companies like BAE Systems and Rheinmetall are scaling up production to deliver 200,000 155mm shells annually by 2026 to meet UK and NATO requirements.

At the same time, policymakers are framing this surge as industrial policy. Defence spending is being used to stimulate regional economies, strengthen supply chains, and support SMEs. For businesses across aerospace, shipbuilding, and high-tech manufacturing, the message is clear: defence is not only about security, but also about growth and innovation.

France’s Defence Spending Plans

Across the Channel, France is pursuing an equally ambitious trajectory. The Loi de Programmation Militaire 2024–2030 allocates €413 billion for defence over the period, with spending set to rise to €52 billion in 2025, €3.3 billion more than in 2024. According to theFrench Ministry of Armed Forces, this makes France the leading continental military power and the backbone of European defence.

The plan places emphasis on nuclear deterrence, cyber defence, intelligence, drones, and space systems. Ammunition and equipment production are also being prioritised, with a 27% budget increase dedicated to rearmament. France is investing in recruitment, R&D, and industrial partnerships, while also promoting innovation in dual-use sectors such as AI, quantum computing, and green energy.

Unlike the UK, Paris situates its strategy within a European framework. The government has tied its investments to EU initiatives like the Strategic Technologies for Europe Platform (STEP/SAFE), which channels European funding toward advanced industrial projects. For UK companies, the recent agreement allowing British participation in SAFE means new avenues of cross-border collaboration are opening up, despite Brexit.

Business Implications: What Industry Needs to Consider

For companies, the rise in defence budgets translates into three key shifts:

• Supply chain resilience. The surge in munitions and equipment production is putting pressure on raw materials, explosives, and specialist components. Firms that can guarantee secure, traceable, and sustainable supply chains will be particularly well positioned.
• Opportunities for SMEs. Both governments stress the role of smaller, innovative firms. In the UK, this is visible in targeted support for regional suppliers, while in France SMEs are increasingly integrated into flagship programmes under the Loi de Programmation Militaire.
• Dual-use innovation. The line between civilian and military technologies is blurring. From AI and quantum to semiconductors, space, and clean energy, governments are looking to civilian-led sectors to deliver tomorrow’s defence capabilities. As the UK’s Defence Review 2025 put it: “Defence and economic security are increasingly inseparable.”

For businesses, this means opportunities are not confined to defence primes. A quantum computing start-up in London or a clean energy company in Lyon could find itself integrated into critical defence supply chains.

Franco-British Cooperation: A New Phase

Bilateral defence ties between the UK and France have also gained new momentum. At the Franco-British Summit in March 2025, leaders agreed to what has been described as a “Lancaster House 2.0” framework. Key outcomes included:

• A £200 million SME cooperation fund to support cross-Channel innovation.
• New joint missile projects led by MBDA.
• A nuclear steering group to deepen dialogue on deterrence and technology.
• Expanded collaboration on space resilience and secure communications.

This renewed partnership is not without asymmetries: France is deeply integrated into EU defence structures, while the UK operates outside of them. Yet the SAFE initiative and bilateral agreements are ensuring that industry remains closely tied. For businesses, this opens opportunities for joint ventures, research partnerships, and cross-border supply chains, particularly in aerospace, defence electronics, and emerging technologies where British and French firms already hold global leadership positions.

Conclusion

The defence landscape in Europe is being reshaped, and the UK and France are at its centre. Both countries are increasing budgets not only to strengthen military readiness, but also to drive industrial renewal and innovation. For businesses, this creates opportunities in munitions, drones, cyber, space, and dual-use sectors. Supply chains must adapt, SMEs are being called on to innovate, and larger firms are expected to partner across borders. With Franco-British defence cooperation reinvigorated, now is the time for companies to position themselves at the heart of this new era of industrial collaboration.

Bibliography

• UK Ministry of Defence. Strategic Defence Review 2025.
• NATO “Defence Expenditure of NATO Countries (2014–2025).” July 2025.
• French Ministry of Armed Forces. Loi de Programmation Militaire 2024–2030.
• UK-France Summit.“Joint Leaders’ Declaration.” March 2025.
• European Commission.2025. “Strategic Technologies for Europe Platform (STEP/SAFE).