UK budget announces billions in new defence finance, Ukraine support

The UK Government has announced billions in additional capital for the National Wealth Fund and the British Business Bank to fund key sectors such as defence, alongside a GBP10 billion hike in support for Ukraine. 

The announcements came as part of UK finance minister John Healey’s first national budget, where he stated his intent to deliver fiscal stability amid a series of “global economic storms”. 

In his speech to Parliament on 28 October, Healey cited the war in Ukraine, high global energy costs attributed to the conflict in the Middle East, and government borrowing costs at levels “not seen for decades”, as particular economic pressures. 

What are the main budget takeaways for defence? 

Despite these economic challenges, Healey said he was committed to growing “Britain’s innovative, fast-growing firms” by making more private investment available.  

Investment in the private sector 

Central to this will be an additional GBP20.4 billion in capital for the National Wealth Fund and British Business Bank. 

Within this, the National Wealth Fund will receive GBP15.4 billion to “sharpen the fund’s focus on strengthening Britain’s security, resilience and industrial growth,” the organisation said.  

The two organisations will also deploy up to GBP5 billion over the next four years to support defence, dual-use, and “other sectors that support our national security, sovereign capability and resilience,” the National Wealth Fund said.  

The British Business Bank, wholly owned by the UK Government, works with commercial banks, lenders, and fund managers to finance SMEs.   

Defence spending 

The UK Government’s defence plans have been shaped around the 2025 Strategic Defence Review and the 2026 Defence Investment Plan (DIP). Following its release, however, the DIP drew widespread criticism over unclear funding plans and an estimated GBP4.7 billion shortfall. 

To address this, during the budget Healey announced that the DIP’s commitments will be “fully funded” through “capital reprioritisation in Whitehall”, suggesting cuts to programmes across government to fund the measures. 

Healey also confirmed that the plan to reach the NATO target of spending 3.5% on defence by 2035 would be announced in the country’s 2027 spending review, alongside plans to reach 3% by 2030.  

Prior to this, a new “Innovative Defence Finance Taskforce” will be launched to lead this spending review work. This comes ahead of the upcoming Defence Finance and Investment Strategy. 

Support for Ukraine 

Another notable part of the budget was the announcement of a further GBP10 billion in military and economic support for Ukraine, on top of the UK’s GBP3 billion annual commitment. 

This additional support will come from loans and grants (GBP7 billion); finance guarantees (GBP3 billion) through UK Export Finance; and direct winter support (GBP500 million), Healey explained. 

It comes as Ukraine faces its fifth winter since the full-scale Russian invasion began, with significant military and civilian budget gaps. 

The multilateral defence initiative 

In the DIP, the UK also outlined plans to launch a new joint financial fund known as the ‘Multilateral Defence Mechanism’. Healey confirmed in the budget that negotiations on the initiative will begin with Finland, Poland, and the Netherlands, with the aim of boosting defence investment and joint procurement. 

Until recently, the UK had been considering joining another proposed international financial mechanism known as the Defence, Security and Resilience Bank spearheaded by Canada. However, on 25 October, the government decided not to join. 

Select regional investments 

Healey’s budget also included regional initiatives to help bolster R&D, and innovation, including some defence and – potential – dual-use facilities:  

• GBP3 million to boost employment in the defence industry in Plymouth 
• GBP3 million for a technology incubator in Don Valley 
• GBP2.5 million for a new science park in Wales 
• GBP7.5 million for a university AI and cyber centre in Belfast 

Cutting regulation 

Moving beyond finance, Healey also announced plans to cut regulation which impact business, including by reducing the red tape companies face when testing new drone technology.  

This, according to the budget document, will be delivered “through a newly established, Ministry of Defence-led drone regulation unit.”