The defence industry has called for a state-backed loan scheme worth hundreds of millions of pounds to help ‘frustrated’ firms secure financing.
Arms companies, particularly smaller ones in the supply chain, have been blocked from opening bank accounts, getting insurance and borrowing money, a report by trade groups ADS and TheCityUK said.
And the Government does not provide enough protection to banks who work with defence companies in the face of protests and vandalism, they added.
It comes amid a major drive to boost the UK’s military capabilities against a backdrop of escalating global conflicts.
European defence spending became a top priority after Donald Trump earlier this year said the US would no longer fund Ukraine in its war with Russia.
A reset in UK-EU relations could pave the way for Britain to access a £125billion European defence fund.
Plea: Smaller defence firms in the supply chain have been blocked from opening bank accounts, getting insurance and borrowing money, an industry report stated
TheCityUK, a lobby group for the financial services industry, and defence firms trade group ADS yesterday published a policy paper aimed at improving finance and investment access for the sector.
A so-called Guarantee Scheme for Defence would see the Government underwrite loans for the smaller firms that supply giants such as BAE Systems and Rolls-Royce.
The state backing would help boost the confidence of banks lending to the sector, the policy paper said.
The scheme, which could be funded by the National Wealth Fund, was estimated to be worth hundreds of millions of pounds depending on demand.
The report said: ‘Recent increased interest in investing in defence companies is welcome, but this increased appetite needs to flow through to the supply chain in the form of greater cashflow and investment opportunities.’
Ministers were also urged to provide more support for banks and other financial service providers operating in the industry following protests and vandalism by anti-war campaigners.
For example, Barclays branches have been targeted by activists opposed to its alleged provision of financial services to Israeli defence firms.
The lender’s annual general meeting in London earlier this month was disrupted by pro-Palestinian activists chanting the slogan ‘stop funding genocide’.
The report said: ‘Despite its support for UK defence businesses, the financial and related professional services industry does not always feel it has sufficient political “air cover” from government.
‘For example, bank branches have been repeatedly targeted and damaged by anti-defence protesters.’
TheCityUK chief executive Miles Celic said: ‘The UK’s defence and security businesses face a number of challenges that don’t arise in other areas of public-private partnership.
‘There is now both an opportunity and pressing need to maximise the contribution of private finance and investment to support UK defence and security businesses.
‘Our industry is committed to working together with the defence industry, government and regulators to develop mechanisms that can help de-risk the industry for the finance and investment community.’
ADS boss Kevin Craven also said: ‘Financing challenges for SMEs and scale-ups in the defence sector need addressing to ensure cashflow, investment opportunities and resilience, which is essential for innovation and economic spillovers.
‘It’s clear that businesses in both the defence and financial services have similar frustrations with existing conditions.’
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