The UK government has unveiled a new £20 million defence innovation fund aimed at opening the defence sector to small and growing British technology companies, marking a major step in accelerating domestic defence innovation and strengthening national security.
Announced by the Ministry of Defence and Defence Secretary John Healey MP, the initiative is part of a broader commitment to increase defence procurement from small and medium sized enterprises. By May 2028, total Ministry of Defence spending with SMEs is set to reach £7.5 billion.
Opening the Defence Sector to Startups
The new fund is designed to support innovative businesses that are fully or partly UK owned and have had limited or no previous commercial engagement with the Ministry of Defence. Through accelerated contracts, selected startups will be able to move more quickly from early stage development to real world deployment with the UK Armed Forces.
The programme is intended to help nurture the UK’s next defence unicorn while giving early stage companies the credibility, revenue and confidence needed to raise private investment and scale their operations.
According to the Ministry of Defence, small businesses are essential to modern defence, bringing speed, creativity and technical agility that larger contractors often struggle to match.
£7.5 Billion Commitment to Small Businesses
The £20 million fund forms part of a wider £2.5 billion increase in defence spending with SMEs through to May 2028, taking total SME procurement to £7.5 billion. This investment underlines the government’s view of defence as both a national security priority and a driver of economic growth.
Defence Secretary John Healey MP said that many of the UK’s leading defence companies began as small ventures and grew over time into global businesses supporting thousands of jobs and strengthening the UK’s security.
The government’s approach is focused on backing British entrepreneurs who are willing to take risks, particularly in sectors that contribute directly to national resilience and strategic capability.
Priority Areas for Defence Innovation
Contracts awarded through the new fund will be led by UK Defence Innovation and shaped by the operational needs of the UK Armed Forces. The search for high potential technologies will focus on areas including artificial intelligence, machine learning and data science, robotics and autonomous systems, and enhanced precision weapons.
These priority areas reflect the Ministry of Defence’s ambition to ensure the UK Armed Forces remain among the most technologically advanced within NATO.
The fund also complements a £400 million ringfenced budget for novel defence technologies, reinforcing long term investment in cutting edge military capabilities.
New Routes to Capital and Early Contracts
In addition to the fund, the Ministry of Defence is launching a Dragon’s Den style pitching initiative for defence technology startups. The scheme aims to provide seed funding for promising ideas at a very early stage, even before companies have secured their first major contracts.
The government is also establishing a Defence Investors’ Advisory Group to connect defence startups with private capital, helping bridge the gap between public procurement and commercial investment.
New Lite Enterprise Agreements have been introduced to reduce commercial barriers for software and AI companies. These simplified frameworks are designed to make it easier for innovative technology providers to work with defence without lengthy or complex contracting processes.
Office of Small Business Growth
To further improve access for SMEs, the Ministry of Defence has launched a new Office of Small Business Growth. The office will help startups navigate defence procurement, addressing long standing concerns that the system is slow and difficult to access for smaller suppliers.
By simplifying processes and improving visibility of opportunities, the office aims to ensure that innovative British companies are not excluded from defence contracts due to scale or lack of prior experience.
Strengthening the UK Defence Tech Ecosystem
The new funding measures form part of the UK’s Defence Industrial Strategy, published last year, which positions defence as a key pillar of economic growth and technological leadership.
By opening up defence procurement to a broader pool of startups and scaleups, the government is seeking to accelerate innovation, strengthen domestic supply chains and ensure British technology plays a central role in the future of defence.
For UK startups working in AI, robotics, advanced manufacturing and data driven technologies, the new defence fund represents a significant opportunity to access long term contracts, scale faster and contribute directly to national and allied security.
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