Britain will require overseas defence suppliers winning selected major military contracts to invest back in the UK, under a new offsets policy published on 30 October. The rules will apply on a case-by-case basis to overseas contracts worth more than £50 million, with a new central Offset Authority agreeing, valuing and monitoring delivery through dedicated Offset Agreements.
Under the policy, a contractor could be required to deliver benefits to Britain worth up to the same value as the contract itself. A £100 million contract, for example, could see new jobs, facilities or skills training worth up to £100 million in the UK. Suppliers will be told early and clearly in the procurement process where an offset requirement applies.
Companies will be able to meet their commitment in several ways, including creating British jobs and apprenticeships, opening or expanding factories in the UK, investing in British suppliers, transferring technology and know-how to UK firms, and using more UK-made components. The government says the approach will encourage overseas suppliers to build enduring partnerships with UK industry and help smaller British firms reach global supply chains.
The policy was announced by Chancellor John Healey and Defence Secretary Wes Streeting on a visit to BAE Systems Scotstoun in Glasgow. It forms part of the government’s Back British approach, under which it says it will buy British wherever possible, and of its Defence Industrial Strategy and £298 billion, four-year Defence Investment Plan.
Ministers argue the change is needed because a large share of defence spending has gone overseas. Since 2016, more than £35.2 billion has been spent on defence contracts and services with industry overseas, representing 11 per cent of total Ministry of Defence direct expenditure with industry and commerce between 2016/17 and 2025/26. Last year alone, the ministry’s defence investment supported 274,000 jobs in UK industry, with £34.1 billion going to businesses based in the UK, and 85 per cent of its expenditure already going to UK firms.
The government also points to its wider defence spending trajectory, with a target of 3 per cent of GDP on defence in 2030, on the path to the NATO commitment of 3.5 per cent in 2035. It notes that allies including Poland, Norway and the Netherlands already use similar offset-type policies. The new policy will apply to a select number of procurements from April 2027.
Sources: GOV.UK, “Defence contracts to prioritise British jobs and skills”, 30 October 2026 (https://www.gov.uk/government/news/defence-contracts-to-prioritise-british-jobs-and-skills); Reuters, “UK to require economic benefits from award of major foreign defence contracts”, 30 October 2026 (https://www.reuters.com/business/aerospace-defense/uk-require-economic-benefits-award-major-foreign-defence-contracts-2026-10-30/).
