Spring statement: Rachel Reeves pledges to make UK a 'defence industrial superpower' as growth forecast halved
Rachel Reeves has pledged to “make the UK a defence industrial superpower” to stimulate growth and jobs across the country in her spring statement.
The Office for Budget Responsibility halved its forecast for growth in gross domestic product in 2025 from 2 per cent to just 1 per cent, which the Chancellor blamed on “increased global uncertainty”.
As such, Ms Reeves told the House of Commons yesterday she was focusing on security, allocating an additional £2.2bn to the Ministry of Defence’s budget for next year.
She described it as “a further down payment on our plans to deliver 2.5 per cent of GDP” in defence spending, adding: “This additional investment is not just about increasing our national security, but increasing our economic security, too.”
The Chancellor said this would be used to drive forward advanced manufacturing and create “demand for highly-skilled engineers and scientists, delivering new business opportunities for UK tech firms and start-ups”.
South Yorkshire is already one of the UK’s key advanced manufacturing hubs, with Sheffield Forgemasters one of the world’s leading manufacturers of steel for high-tech components, while Leeds is at the centre of much of the country’s tech innovation.
Ms Reeves said: “We will establish a protected budget of £400m within the MoD for UK Defence Innovation, rising over time, with a clear mandate to bring innovative technology to the front line at speed.”
The Chancellor also pledged to “secure better homes for thousands of military families” in areas such as York Outer.
Henri Murison, chief executive of the Northern Powerhouse Project, said: “The investment in defence, including the ring-fenced innovation funding, will unlock growth in regions across the North from Barrow to Teesside, where existing submarine orders for the Navy and export are already driving increased opportunities and jobs.”
The Chancellor’s spring statement came as the Ministry of Defence agreed a £1.6bn contract extension with Babcock, a firm based at RAF Leeming in North Yorkshire.
This will cover vital military assets including Challenger 2 tanks, 105mm artillery guns and Trojan armoured vehicles, ensuring they remain combat-ready.
The contract will create 125 highly skilled jobs in Yorkshire, and help prepare the UK for its role in the “coalition of the willing” to help secure any peace deal in Ukraine.
Defence Secretary John Healey said: “Supported by the largest sustained increase in defence spending since the Cold War, this substantial investment with Babcock demonstrates how defence is an engine for growth - supporting businesses of all sizes and sustaining more than 125 good, well-paid jobs in Yorkshire and the Humber.”
Elsewhere in the spring statement, Ms Reeves confirmed that her fiscal headroom - the amount of money spare in the Treasury - had been wiped up by a combination of a rise in borrowing costs and stagnating growth.
The Chancellor confirmed a further squeeze on the welfare budget, building on cuts to the disability and incapacity bill set out earlier this month, with the package now expected to save £4.8bn by 2029/30 rather than the more than £5 billion hoped for by ministers.
And she signalled cuts in Whitehall, with “voluntary exit schemes to reduce the size of the civil service”, taking advantage of technology to “make Government leaner, more productive and more efficient”, saving £3.5bn by 2029/30.