Understanding the Industrial Implications of the UK's Strategic Defence Review 2025
Introduction
The Strategic Defence Review 2025 marks a turning point in the UK’s defence and industrial policy. Framed by a context of geopolitical volatility, intensified military competition, and renewed commitments to NATO, the review sets out a radical transformation of British defence posture, doctrine, and capabilities. At the centre of this transformation lies an ambitious financial pledge: the government will increase defence spending to 2.5% of GDP by 2027, with the stated ambition to reach 3% in the following Parliament. This translates into the most substantial and sustained rise in UK defence budgets since the Cold War, with total expenditure projected to increase by nearly £6 billion in real terms between 2023 and 2026 alone. The Defence Investment Plan, due in Autumn 2025, will allocate these resources across equipment, infrastructure, digital transformation, force readiness, and innovation.
This analysis aims to answer a fundamental question: which sectors and which companies—primarily British—are likely to benefit most from this rearmament effort? The review lays out a series of high-priority domains for investment: continuous nuclear deterrence and submarine production, advanced surface fleet procurement, land combat platforms and munitions, autonomous and AI-based air and space systems, secure digital and cyber architecture, and a complete overhaul of defence infrastructure. In each of these areas, the government signals a preference for UK-based industrial capacity, with only limited and clearly defined roles for foreign partners.
While the core figures and programme priorities cited in this report are drawn directly from official UK government documents—including the Strategic Defence Review 2025 and supplementary parliamentary briefings—the identification of specific companies likely to benefit is based on sectoral alignment, industrial roles in current procurement cycles, and known participation in past MoD contracts. In particular, firms such as SubSea Craft, SeeByte, L3Harris ASV, Horiba MIRA, Pearson Engineering, WFEL, and Ark Data Centres are not named in the official SDR 2025 text, but are included here on the basis of their technological profiles and alignment with the investment priorities defined in the review. Where appropriate, their potential involvement is described using conditional language (e.g. “expected to benefit”, “likely to contribute”), and should be read as informed projections, not formal contract outcomes.
By analysing the key budget lines, capability programmes, and force design trajectories outlined in the Strategic Defence Review, this report identifies the specific industrial sectors where the defence economy will expand and the domestic firms best positioned to secure future contracts. Companies such as BAE Systems, Rolls-Royce, Babcock, MBDA UK, QinetiQ, Thales UK, Chemring, and General Dynamics UK emerge as clear institutional beneficiaries. The analysis also highlights how this growth will extend to the munitions industry, the infrastructure and logistics sector, and the emergent UK ecosystem for space and cyber technologies. In doing so, it clarifies not only how the British armed forces will evolve, but how public procurement will be used strategically to strengthen the national industrial base and long-term economic resilience.