Defence Secretary John Healey has revealed talks with Chancellor Rachel Reeves to help firms that has been snubbed by banks worried about their image
The Government is set to make it easier for British defence firms to borrow money, amid signs some are being ‘debanked’.
Sources say a growing number of companies in the field have been shunned by lenders keen to distance themselves in recent years, amid concern about the potential toxic link and pressure from campaigners and shareholders.
High street lenders have been accused of endangering British national security by continuing to deny bank accounts to defence companies. Several major banks are said to be refusing to provide basic services to defence businesses despite efforts by the Government to tackle the issue. It comes with a wider ESG – Environmental, Social and Governance – drive within business.
Insiders say UK firms have lost out to foreign rivals as a result, while others have been prevented from expanding. Yet ministers are now looking to the industry as the government announced a more than £13billion hike in defence spending to support Ukraine in its war against Russia and a bid to maintain a hoped-for peace deal.
Prime Minister Sir Keir Starmer and Defence Secretary John Healey hosted a Downing Street event to highlight the importance of small and medium-sized defence firms in any spending spree. The PM told those present: “Thank you for the part you are playing in keeping our country safe and secure.”
The government also announced plans to launch a new hub to provide small and medium firms with better access to the defence supply chain.
But Mr Healey also revealed that he and Chancellor Rachel Reeves were ready to act to help firms that were struggling to secure the right funding. He told the Mirror: “The Chancellor and I are doing some joint work on that. We are assessing the barriers to investment to defence and security and we will make announcements on that later.”
The Government has also pledged to provide small and medium enterprises (SMEs) with better access to the defence supply chain as it committed to set direct SME spending targets for the Ministry of Defence by June this year.
Mr Healey said: “Small and medium sized firms often feel locked out of MoD work. The previous government set targets for the proportion of spending going into SMEs and it has been falling, not rising.”
The Government claims the boost to defence spending will ultimately benefit the wider economy. Nearly 70% of defence spending goes to businesses outside London and the South East, it said. However, only 4% of this spending went to small and medium sized firms last year. Sir Keir told reporters: “We should real confidence – we are really good at this in Britain, we are really good at making things. We are front of the game when it comes to AI and technology. We punch above our weight and we want to make sure we sure we stay in that place.”
