UK’s National Wealth Fund to invest in defence tech firm after Budget funding boost
The chancellor is reportedly exploring different ways to fund increased defence spending, including a multilateral financing mechanism with NATO allies and private finance for some equipment.
The proposed mechanism would involve the UK, Finland, the Netherlands and Poland. It could raise capital on international markets to finance defence purchases and provide funding for domestic defence companies.
Ministers are also expected to announce new requirements for overseas defence companies winning UK contracts to invest in the UK. The proposed rules would apply to contracts worth more than £50m, with investment matching the value of the contract.
Tom Clarke, partner in the Private Equity Group at global law firm White & Case, commented: “As governments across the world race to rearm, they are exploring a range of ways to fund defence. At the same time, there is a wall of private capital looking for opportunities in defence technology as previous investment restrictions are relaxed and investors rush to gain exposure to a highly attractive sector, with long-term structural growth tailwinds.
“Working with NATO allies could help the UK unlock further private capital and bring forward investment in new equipment. The UK is well placed to attract that investment, thanks to its mature VC ecosystem, deep pools of private capital and ready access to global money markets. The UK’s appeal as an investment hub is reflected in recent White & Case research, which found that 97% of surveyed UK defence and defence technology companies regard the UK as Europe’s leading destination for defence technology investment.*
“Governments are also seeking to build world-class sovereign defence technology capabilities to rebalance their reliance on other countries and the reported plans to require overseas defence companies bidding for UK contracts to invest in the UK could further support this trend, strengthening domestic supply chains and defence capabilities.”
**White & Case Research – Front line capital: The investment outlook for the UK defence technology sector