Defence contracts to prioritise British jobs and skills

30 Oct 2026 09:22 AM

Overseas firms winning UK defence contracts to be required to invest benefits back into the UK under new Offsets policy.

British workers, businesses and apprentices will benefit from major changes which will see more defence work carried out in the UK thanks to the launch of a world-leading Offsets policy. 

Under the new rules, overseas companies that win significant UK defence contracts will be required to invest back into Britain, through new British jobs and apprenticeships, opening UK factories, investing in domestic suppliers, transferring technology and innovation know-how.  

This means contracts worth over £50 million will be considered for offsets. The contractors will be required to deliver such benefits to the UK that could reach the same value as the contract, for example a £100m contract could see new jobs, facilities, or skills training up to the same £100m value in the UK.

The government is prioritising buying British defence contracts wherever possible. Where it must buy defence equipment from overseas, this new approach will ensure British workers and businesses still benefit.  

The move will encourage overseas defence suppliers to build enduring partnerships with UK industry, helping UK SMEs to access global supply chains and create new opportunities for growth. 

Announced today by the Chancellor and Defence Secretary on a visit to BAE Systems Scotstoun, Glasgow, the policy applies to overseas defence contracts worth £50 million or more, delivered through the government’s Back British approach set out in the Budget. 

Chancellor of the Exchequer, John Healey MP said:  

We are putting British jobs and British businesses at the heart of how Government spends taxpayers’ money.

When a big contract goes overseas, these changes will ensure 100% of the value creates new opportunities for workers and businesses here at home, strengthening our industrial base and supporting growth across Britain.  

The defence economy in Scotland is worth £2.5 billion and directly supports 12,200 jobs, backed by the recent £10 billion Norway export deal for Type 26 Frigates supporting 2,000 local jobs and the £453 million Typhoon radar system supporting 300 roles in Edinburgh.

Defence Secretary Wes Streeting MP said: 

Every pound we invest in defence should be judged by what it does for Britain. That’s why we are backing British by buying British wherever we can.  

Even when that is not possible, we are acting to ensure that any investment brings jobs, skills and investment back home, strengthening our national security by boosting our domestic industry. 

Since 2016, over £35.2 billion has been spent on defence contracts and services with industry overseas, representing 11 per cent of total MOD direct expenditure with industry and commerce between 2016/17 and 2025/26. 

The new policy means future spending of this kind will also support jobs, skills and growth at home. 

Companies that win qualifying contracts will be able to meet their commitment in several ways, including: 

The UK joins allies who already use similar offset type polices to boost the economic benefit from defence procurement, such as Poland, Norway and the Netherlands. 

Under the policy, overseas contracts worth over £50 million will be considered for offset. A new central Offset Authority will agree, value and monitor delivery through dedicated Offset Agreements, ensuring consistency across the lifetime of each arrangement. 

Where the UK must buy defence equipment from overseas, this policy ensures Britain gets something back. The approach will be applied on a case-by-case basis by the MOD.  

Last year alone, the MOD’s defence investment supported 274,000 jobs in UK industry, up 10 per cent on the year before, with £34.1 billion going to businesses based in the UK - and 85% of MOD expenditure already goes to UK firms.

The government’s fully funded Defence Investment Plan - backed by £298 billion over the next four years - will deliver stronger front-line military capability, supporting jobs, businesses and economic growth across the UK. 

The policy delivers key commitments from the Defence Investment Plan and Defence Industrial Strategy, and forms part of the Government’s wider Back British approach through the Budget.  

It follows the Chancellor’s announcements on Wednesday confirming a new commitment for the National Wealth Fund and British Business Bank to deploy up to £5 billion over the next 4 years into defence, dual use and other sectors that support our national security alongside the commencing of treaty negotiations with the Netherlands, Poland, and Finland on the Multilateral Defence Mechanism to procure at scale and stockpile vital equipment which the UK has access to. 

The Offset Policy is published today (30 October) and will apply to a select number of procurements from April 2027, with suppliers notified early and clearly where offset requirements will apply.