Series Introduction

On the 8 September 2025, the Government published the Defence Industrial Strategy (DIS) with the objective of strengthening the UK’s industrial capability to deliver upon the Strategic Defence Review (SDR). The strategy sets out its plan across six priority outcomes:

  • Making Defence an Engine for Growth – find more here
  • Backing UK Based Business
  • Positioning the UK at the Leading Edge of Defence Innovation
  • Developing a Resilient UK Industrial Base
  • Transforming Procurement and Acquisition Systems
  • Forging New and Enduring Partnerships

Members can read ADS’ initial briefing on the DIS here, which provides an overview of the strategy.

Introduction – Backing UK Based Business

The UK’s defence industry stands at a pivotal moment as the Government’s strategy on offsets, exports, and social value signals a new approach to defence procurement, designed to ensure that investment in defence directly strengthens the domestic market. The DIS strikes a balance, between ensuring domestic stability and encouraging export competition, that will not only sustain vital capabilities but also sharpen the UK’s commercial edge on the global stage. Increasing the benefit of strategic imports would be crucial to bringing economic prosperity and strengthening the UK’s position as a market leader in core technologies.

A New Offset Policy

The announcement of plans for the framing and adoption of a new UK offset policy marks a decisive development in the Government’s approach to strengthening the nation’s defence industrial base. Set to launch in the first half of 2026 following a full public consultation, the new policy signals a commitment to ensuring that defence procurement delivers maximum value back into the UK economy.

ADS has long been advocating for the introduction of a formal Industrial Participation Policy (IPP) that is time-bound, measurable, and enforceable. The plans for the new offset policy promise precisely that. It aims to channel inward investment into priority sub-sectors vital for both national security and industrial growth; while supporting technology transfer, developing domestic capacity, and opening doors for UK firms to join global supply chains. Drawing inspiration from the success of international models such as those in Australia and Canada, the UK model should be developed to reflect our own strategic priorities and industrial strengths.

Key to its success will be clear outcomes, flexibility in application, and a robust implementation framework that ensures accountability and transparency. The Government’s decision to engage in full consultation with industry is an encouraging sign. ADS looks forward to working closely with officials to help refine and test a regime that supports UK jobs, innovation, and competitiveness for the long term.

Strengthening The Domestic Market

Within the DIS, the Government identifies that “any new offset policy must sit alongside a reformed application of the social value model”, to be brought in for the beginning of the 26/27 financial year. ADS’ submission for the DIS called for the Government to review the criteria and implementation for the social value model and describe its interaction with future IPPs. ADS believes a new approach to social value has the potential to encourage the long-term partnerships that support growth and ensuring that procurement decisions will better support SMEs and their supply chains.

A resilient and competitive home market, underscored by the forthcoming social value and offset policies, will be central to building the industrial base the UK needs. To lay further groundwork for strengthening domestic capability and investment, the DIS makes several other announcements:

  • Competition and Markets Authority (CMA) – commissioned to monitor competition and supply chain structures in the defence sector
  • New SME Action Plan – (autumn 2025) plus a bespoke SME Commercial Pathway, making contracting simpler, faster, and more accessible. To be best successful these must interconnect with the new defence office for small business growth
  • SME spend targets – MOD to increase spending with SMEs by £2.5 billion by May 2028, with transitional rules for scaling SMEs
  • British Industrial Competitiveness Scheme (2027) – to reduce electricity costs for manufacturing by £35-40/MWh until 2030
  • Expedited planning permission – from May 2025, to speed up defence-related infrastructure projects
  • MOD package of support for UK-based businesses – by April 2026, including regulatory streamlining, improved collaboration, and stronger comparative advantage in key sectors

One notable omission from the DIS is the lack of focus on the Defence Technology Exploitation Programme (DTEP). Despite five successful cycles and clear evidence of its value in supporting SME innovation and collaboration, DTEP is mentioned only in passing with regards to the dual-use landscape. Unless this is incorporated into, UK Defence Innovation (UKDI), there is missed opportunity to build on the successes of DTEP to develop an effective tool for industrial engagement and growth.

Export Reform

The creation of the new Office for Defence Exports (ODE) marked one of the most striking reforms to emerge from the SDR. For the first time, export campaigning will be led directly by the National Armaments Director, bringing coherence and accountability. The DIS also promises a new Government-to-Government (G2G) Framework offer. This delivery was something specifically suggested by ADS in its submission, with the aim of making the UK more competitive, agile, and visible.

ADS had also called for reform to the export licensing system, suggesting the Government leverage the use of AI and digitalisation to speed up export licensing decisions.

While the current absence of an exports-focused inter-ministerial working group or a dedicated ministerial champion remains disappointing, the establishment of the ODE and the reforms surrounding it are nonetheless a strong foundation. However, the current lack of a cross-departmental focus on defence and security exports could undermine the entire ODE.

Conclusion

The DIS sets out a promising roadmap to strengthen the UK’s defence industrial base and build a more competitive domestic market. However, these announcements must now be matched by clear implementation and decisive action. ADS recognises its vital role in shaping this next phase, particularly through forthcoming consultations on the new offset policy.