Changes in the geopolitical environment have never been more present in the United Kingdom. Growing tension and emerging threats within key regions of the world have influenced how the government is spending national defence budgets and acquiring new defence and military-based equipment.
Spending on defence programs has ballooned in recent years, and under Prime Ministers Boris Johnson and Rishi Sunak, defense spending has reached stratospheric levels. The United Kingdom is projected to spend an estimated 2.3% of its Gross Domestic Product (GDP) on defence programs in 2023/2024, the largest of any country in Europe.
In monetary terms, the government has allocated £54.2 billion of the national budget towards defence spending. Between 2024/2025, this amount is projected to increase by 4.5% to £57.1 billion, as the government continues spending efforts to acquire and develop more advanced defence capabilities to wane off potential threats.
Growing uncertainty and heightened tensions have meant that countries around the world have started to rethink their defence strategies. With the political climate beginning to change, governments are introducing a new era of defence contracting that will likely reshape the future of the industry.
Geopolitical Trends Shaping the Defence Industry
Several important political changes have been taking place in recent years, and have acted as a driving force for many countries, including the UK to rethink its defence contracts spending, allowing them a more competitive advantage in the defense sector.
Regional Instability: Increasing conflict between nations and political groups in the Middle East, Eastern Europe and parts of Africa have driven up demand for military goods and personnel. Since the invasion of Ukraine by Russia, European nations have bolstered military stockpiles, including defence products such as counterterrorism and surveillance equipment.
Cybersecurity Threats: Digital development and the rise in cybersecurity threats have seen a sharp increase in spending for cybersecurity protocols and the development of key cybersecurity programs within the national government. The introduction of the National Cyber Strategy has seen budget allocation swell to more than £2.6 billion between 2023 – 2025.
Global Power Shift: Global superpowers are beginning to see cracks in the system they have previously relied on for democratic progress and development. For instance, new relationships between China, Russia, Iran and North Korea are shaping the future of nuclear power on the global stage, directly threatening the democratic landscape in the West.
Growing Nationalism: Civilian nationalism and protectionism demonstrations have become more frequent as immigration continues to remain a hot-button issue in the United Kingdom. These demonstrations are influencing how the government seeks to acquire goods and services, instead focusing on supporting domestic manufacturers and severing ties with international partners.
The Impact of Global Politics on Defence Contracting
The power shift among nations in the Great North has forced the UK government to rethink how defence contracting can be improved to serve the long-term needs of the country and the domestic defence sector.
Increased Defence Spending
As tensions continue to escalate, the government has taken measures to strategically increase its defence budget. As previously mentioned, the UK spent an estimated 2.6% of GDP on defence, surpassing the 2% threshold required by NATO members. The UK along with other NATO members are rapidly seeking ways to improve current procurement regimes to provide better long-term solutions to current needs.
Rising Demand For Digital Capabilities
A show-off between nations on the digital front will become even more apparent in the coming years. Rising cybersecurity threats have become a thorn in the side of the government, leading them to seek more particular defence technologies and capabilities. These changes have directly shaped contract priorities, with increased budget spending and project activity.
Supply Chain Challenges
Tensions among military and political groups in the Middle East have seen the government rapidly change course of action, instead focusing on providing domestic suppliers with contract opportunities to fulfil near-term needs. Current production of military equipment is being placed in the hands of domestic manufacturers, including those in Europe, as they can provide the government and Ministry of Defence (MOD) with more reliable solutions.
The competitive edge would be to improve private sector collaboration, enhancing business growth and new contract opportunities to initiate early engagement. MOD announcements are still solely focused on obtaining primary suppliers, however supply chain disruptions could present new sub contracting opportunities for businesses.
Predictions for the Future of Defence Contracting
Looking forward, defence contracting will continue to be influenced by the future of the geopolitical landscape. As new emerging threats become a reality closer to home, and tension between nations continues to escalate, influences of international relations will have a direct impact on how the government approaches its defence contracting.
Rise In Digital Spending
Cybersecurity threats will continue to be a problem for the government and various central government agencies. The need for better and more advanced digital safety nets will require the government to place more emphasis on the importance of having the necessary digital structure in place to circumvent current and future threats.
Increased Demand For Artificial Intelligence
Artificial Intelligence (AI) capabilities are already being put to the test across the world, with nations such as the U.S. and China looking to lead the race to innovation. As these activities continue to intensify, we will see the government taking a more aggressive approach to invest in the development of artificial technology as a form of military and defence capabilities.
Automation Processing
There is currently a strong demand for automation processing within the defence sector. As agencies begin to acquire more advanced processes, the data necessary to understand these developments will require large amounts of automation to help create more efficient systems.
Automation is already taking an important place at the discussion table, and in the coming years, these developments will help reshape how the military and wider defence industry conducts research and operations.
Agile Contracting
Current procurement processes restrict and limit government and supplier flexibility. As uncertainty looms ahead, a new approach will be necessary that would allow the government more autonomy when seeking new suppliers.
The introduction of agile contracting will allow both government agencies and suppliers to quickly adapt to a rapidly changing political environment.
Data-Driven Decision-Making
Machine-driven decision-making will become more commonplace within the defence sector as highly complex scenarios require the assistance of advanced data analysis. Already there has been a strong need for developing more sophisticated data-driven machines, and in the coming years, we are likely to see more of these tools taking up priority within the defence industry.
Conclusion
Defence contracting is changing, and geopolitical escalation is influencing how governments are acquiring defence goods and services. Emerging threats and ongoing tension are placing more emphasis on sector-specific goods and services, in turn allowing for the government to introduce a more flexible and agile procurement regime.
The coming years present a lot of uncertainty for the government, however, there are plenty of new opportunities for suppliers in the defence sector to showcase their talent and expertise. To stay ahead of current developments, partner with an agency that can provide you with the support and guidance needed to navigate the complex procurement process.
DCI can provide your business with the guidance needed to overcome complex processes and better navigate procurement requirements through our defence sourcing portal. As defence contracting continues to evolve on the back of geopolitical tension, DCI will help your business play a key role in the future of the defence contracting sector.
