The United Kingdom will invest £250 million (approximately 468.7 billion won) to stimulate its domestic defense industry. Earlier, the UK had promised to increase defense expenditure to 2.5% of GDP by 2027.
On the 8th (local time), the Financial Times (FT) reported that the UK Ministry of National Defense announced an investment of a total of £250 million into the defense industry through its 'Defense Industrial Strategy.' Defense Minister Jon Healy is expected to declare this strategy during a visit to the high-tech sector in the southwestern city of Bristol, where many British defense companies are located.
This strategy focuses on five 'defense growth deals' that will be promoted throughout the UK. The plan is to support local governments, corporations, and research institutions with large-scale investments to enhance the cohesion of these three entities and improve the competitiveness of the defense industry, thereby revitalizing the local economy. The Ministry of National Defense explained, 'We will provide support to enable the local community and industries to realize their respective potentials.'
The UK government is shifting from a budget management approach that reduces defense expenditure to invest in social infrastructure, known as 'peace dividends,' to one that actively utilizes defense expenditure for economic growth, referred to as 'defense dividends.' Previously, Western countries significantly cut defense spending after the dissolution of the Soviet Union and the end of the Cold War in the late 1980s, reallocating the saved budgets to social welfare and education. However, as concerns over national security have risen due to the protracted Russia-Ukraine war and pressure from U.S. President Donald Trump to increase defense budgets, there is a gradual trend towards increasing funding for defense.
This strategy is also linked to a large export contract that the UK recently secured from Norway. Last month, Norway signed a contract to purchase at least five Type 26 frigates from British defense contractor BAE Systems, with the contract value reportedly reaching approximately £10 billion (about 17 trillion won). According to industry sources, the UK is currently engaged in similar negotiations with Denmark and Sweden.
The defense industry is hopeful about expanding and creating jobs. According to the UK Aerospace Industry Association (ADS), if defense expenditure rises to around 3% of GDP by 2035, approximately 50,000 new jobs will be created, and around 85,000 jobs will be generated if it reaches 3.5%. Currently, there are approximately 180,000 people employed in the UK defense sector. Kevin Craven, the ADS representative, emphasized, 'The defense and security industry fundamentally stands for protection and deterrence,' but noted that 'the economic value generated by defense is gradually expanding.'
The UK currently spends 2.3% of its GDP on defense, according to North Atlantic Treaty Organization (NATO) standards. The government aims to raise this to 2.5% by 2027 and to reach 3% in the next Parliament. The UK Office for Budget Responsibility estimates that if defense spending increases to 3% of GDP, additional expenditure will reach approximately £17.3 billion. To expand to the NATO overall goal of 3.5%, around £30 billion (approximately 50 trillion won) will be needed, and it seems that cuts to public spending, such as welfare, will be unavoidable to achieve this.
UK Prime Minister Keir Starmer has been advocating for proactive defense spending. Previously, Prime Minister Starmer noted that 'we will begin the largest sustained increase in defense spending since the Cold War,' adding, 'The increment in defense spending will be fully covered by reducing foreign aid budgets.'