IN Brief:
- Ministry of Defence expenditure with UK industry reached £34.1 billion in 2025/26, up 3.2% after inflation.
- Equipment and equipment support accounted for £20.9 billion, while weapons and ammunition spending rose 18%.
- Direct SME expenditure reached £1.3 billion but remained 4% of direct UK industry spending.
UK defence spending with domestic industry reached a record £34.1 billion in 2025/26, according to new official statistics from the Ministry of Defence. The total was 3.2% higher than the previous year after adjusting for inflation, equivalent to a real terms increase of £1.1 billion.
The figures cover direct Ministry of Defence expenditure with UK industry and commerce and provide regional and sector breakdowns of where that money was recorded. The 2025/26 total is the highest in the current series, which begins in 2013/14, even after earlier years are adjusted into constant 2025/26 prices.
Equipment and equipment support accounted for £20.9 billion, or 61% of UK industry expenditure. Weapons and ammunition spending reached £2.4 billion, up 18% in real terms, with the classification also including military fighting vehicles. Higher payments associated with Boxer and Ajax contributed to that rise, increasing by £77 million and £21 million respectively.
Regional totals remain concentrated around established defence and aerospace clusters. The South East recorded £8.45 billion of expenditure, followed by the South West at £6.66 billion and the North West at £5.42 billion. Northern Ireland recorded the largest percentage increase, rising 63% to £464 million, although much of that movement reflects a reallocation of location data associated with contracts for three Fleet Solid Support vessels.
The South West, Wales and London were the only regions to record real terms declines. Wales fell 12%, partly because payments under a long-term BAE Systems munitions contract were around £79 million lower than in the previous year. London fell 20%, with improved mapping of high-value contracts shifting spending away from company headquarters and towards the regions where work is carried out.
Annual contract data naturally move with programme milestones. Major programmes can produce large payments in one year and smaller payments in the next without a corresponding rise or fall in underlying industrial capacity. The statistical series consequently gives more useful evidence over longer periods than from isolated annual changes, particularly in regions dominated by a small number of high-value contracts.
Small and medium sized enterprises received £1.3 billion in direct Ministry of Defence expenditure during 2025/26, equal to 4% of direct spending with UK industry. The proportion was unchanged from the previous year. The North East recorded the highest regional SME share at 48.5%, although its absolute defence spending total is much smaller than those of the largest regions.
The SME figure captures only direct payments from the department. Smaller companies can also receive substantial defence revenue through prime contractors and tiered supply chains, so the 4% share does not represent the full value of SME participation. It does, however, show how concentrated the Ministry of Defence’s own direct payment base remains among larger suppliers.
Global industry and commerce expenditure reached £40.4 billion when direct overseas payments, foreign governments and US Foreign Military Sales arrangements are included. The department calculates that 85% of this global expenditure was attributable to work taking place in the UK once indirect UK activity under foreign-government and FMS arrangements was counted. Looking only at direct industry payments, the UK share was 89%.
Expenditure per person reached £490 across the UK, up £10 in real terms from the previous year. The South West remained highest at £1,130 per person, followed by the South East and North West. These figures provide another view of regional concentration, although they are still driven by contract location and payment timing rather than a direct measure of local economic dependence on defence.
The sector breakdown shows where current programme activity is feeding through most visibly. Weapons, ammunition and military fighting vehicles posted the largest percentage increase among the industry groups tracked, while shipbuilding and repair remained the second-largest group by value. Equipment and support together continued to account for well over half of total domestic industry spending.
Annual expenditure does not translate directly into new factories, workforce growth or higher production rates. Companies make those investments against expectations of demand over several years, and large one-off payments can distort the picture if treated as evidence of permanent industrial expansion. Stable order books, contract visibility and production schedules determine whether suppliers can justify additional tooling, facilities and skilled labour.
Further annual releases will show whether the current movements persist beyond the programme payment cycle. Spending has risen in real terms, weapons and vehicle expenditure has grown sharply, and equipment plus support remains the dominant part of the total; sustained industrial capacity will depend on whether that demand remains visible over the longer investment horizons required for plants, tooling and workforce expansion.