UK Export Finance has fired the largest single shot in its century-long history, setting aside a fresh £50 billion to bankroll British defence exports at a moment when the world is rearming faster than at any time since the Cold War.

The new Defence Export Fund takes the government’s export credit agency from an £80 billion ceiling to a total capacity of £130 billion, with the additional £50 billion ring-fenced to support large-scale defence sales and shore up Britain’s competitiveness in a market that is expanding at remarkable speed. For an agency that has spent 100 years quietly underwriting the deals that keep British goods moving across borders, it is a statement of intent.

The timing is no accident. Global military expenditure climbed to a record $2.7 trillion in 2024, a 9.4 per cent year-on-year jump that, according to the Stockholm International Peace Research Institute, was the steepest rise since at least the end of the Cold War. Spending rose across all five of the world’s regions, driven by the war in Ukraine, conflict in the Middle East and a broad reappraisal of national security among Western governments. Allies are not only spending more, they are actively shopping for the kind of advanced capability that British industry is well placed to supply.

The mechanics are straightforward enough. UKEF will guarantee the bank loans taken out by British defence exporters as they fulfil contracts, and it will provide or back the financing extended to other countries buying British defence products. In practice that means a UK manufacturer can compete for a major overseas order knowing the financing is underwritten by the government, while the purchasing nation gets access to a competitive, state-backed payment package alongside the kit itself.

That combination, world-leading hardware paired with government-backed finance, is what ministers hope will tip large contracts in Britain’s favour. The fund is open to defence businesses of every size, from established prime contractors to the smaller firms looking to break into international markets for the first time, a constituency that has historically found export finance hard to navigate.

It is a theme UKEF has been building towards for some time. The agency has already widened its toolkit for smaller exporters, unveiling new products designed to help SMEs trade globally and to remove some of the friction that has long deterred first-time exporters from chasing overseas work.

The Defence Export Fund does not arrive out of nowhere. UKEF has been steadily deepening its defence portfolio, backing landmark deals that include air defence systems for Poland and Ukraine and submarine rescue vehicles for Indonesia, transactions that translate into skilled jobs and economic value spread across the UK rather than concentrated in a single region.

The numbers have grown accordingly. Defence transactions worth more than £5 billion are now routine for the agency, and it supported a total of £10 billion of defence business in the 2024/25 financial year alone. With that trajectory showing no sign of flattening, the new allocation is designed to let UKEF meet rising demand without running up against its own limits.

That ambition sits within a wider government push to treat defence not merely as a security obligation but as an engine of industrial growth. Westminster has moved to boost domestic weapons production and cut reliance on imports, while a separate drive aims to give smaller defence firms easier access to Ministry of Defence contracts. The export fund is the international-facing piece of that same strategy.

‘Allies are actively seeking what Britain can build’

Tim Reid, chief executive of UKEF, framed the move as a response to genuine demand from partner nations. “Security is a strategic priority for governments worldwide, and the UK’s defence sector offers pioneering capabilities that allies are actively seeking,” he said. “With billions of pounds available in new export financing, we are strengthening the sector’s global competitiveness while backing skilled British jobs and supporting long-term economic growth.”

The agency, which sets out its broader approach in its strategic financing for industrial growth, has set itself a clear target. By 2029 it aims to help UK firms win more than £12.5 billion of new export contracts through its finance offer, with defence expected to account for a growing slice of that total.

For Britain’s defence businesses, large and small, the message is that the financing constraint which once kept them on the sidelines of the biggest deals has been substantially loosened. Whether that translates into the contract wins ministers are banking on will depend, as ever, on the firms themselves. But the cheque book has rarely been bigger.

Amy Ingham

Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.

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