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Research and development for defence aims to create new military capabilities or improve existing ones. How is it funded in the UK, and what are the challenges?

Documents to download

• ‘Research and development (R&D) for UK defence’ report (674 KB , PDF)

DOI: https://doi.org/10.58248/PN766

Rapid technological developments and rising global instability have brought increased focus to the UK’s military capabilities, specifically to research and development (R&D) for defence. R&D refers to systematic work to create new scientific or technical knowledge or to develop new capabilities. Some of these technologies have both civilian and military applications, such as drones or the Global Positioning System (GPS); these are called ‘dual-use’ technologies.

How is R&D for UK defence funded?

Most R&D for defence in the UK is funded by the Ministry of Defence (MOD); around 65% of defence R&D was funded by the government in 2023/24. This money is mostly spent in private industry, with over half (58%) of the MOD’s total expenditure going to 50 large defence companies, often referred to as ‘primes’.

In 2024/25, the MOD spent £3.1 billion on R&D, around 5% of its total departmental budget. In February 2025, the government announced plans to increase overall defence spending in the coming years. 

R&D for defence also take place across the wider innovation ecosystem, including within the MOD (in the Defence Science and Technology Laboratory, Dstl), in smaller companies and in universities.

What is UK Government policy?

The Strategic Defence Review 2025 announced the government’s aim for the UK to become a “tech‑enabled defence power”. This included stronger links between the armed forces, small and medium-sized enterprises (SMEs) and universities to speed up innovation and promote regional growth.

The government also plans to publish a Defence Investment Plan, intended to give industry a clearer picture of the MOD’s future spending priorities (a ‘demand signal’), but it has been delayed. Stakeholders raised concerns that the delay could make parliamentary scrutiny and long-term industry planning more difficult. 

What are the challenges for defence R&D?

Stakeholders have said there are skills shortages in the UK in science, technology, engineering and maths (STEM), which are making it difficult to recruit skilled workers, particularly for roles requiring advanced security clearance.

A more general challenge is that it is difficult to move technologies from prototype to deployment (often described as the ‘valley of death’), which can stop innovations being successfully used. This is particularly true for SMEs, which may struggle to get funding to grow their business.

Some stakeholders say it can be difficult to integrate new technologies into existing systems because they do not always have ‘open’ design standards, which would allow equipment and software to be modified, replaced or added. Other challenges include a tendency to over-develop technology, which slows down innovation, complicated subcontracting arrangements, and unclear demand from the government.

What is happening internationally?

The United States spends the most on defence R&D out of all countries in the Organisation for Economic Co-operation and Development (OECD), accounting for between 70% and 80% of all OECD spending in this area. Among OECD countries, the UK allocates the third‑highest share of its government R&D budget to defence.

It is difficult to compare this with countries outside the OECD, including China and Russia, because there is less publicly available data, and estimates vary between sources.

Acknowledgements

This briefing was produced in consultation with experts and stakeholders, who are listed at the end of the briefing. The briefing was co-funded by the Royal Society of Chemistry. POST would like to thank everyone who contributed their expertise to this briefing.

Documents to download

• ‘Research and development (R&D) for UK defence’ report (674 KB , PDF)