Defence contracts to prioritise British jobs and skills
The UK government will require overseas defence contractors to reinvest contract value into British jobs, skills and suppliers under a new Offsets policy for deals over £50 million.
Overseas firms winning major UK defence contracts will be compelled to reinvest an amount equal to the contract value into the UK through new jobs, apprenticeships, factory openings, domestic supplier investments and technology transfers. Contracts valued at £50 million or more will be subject to the policy, which aims to ensure British workers and businesses benefit even when equipment must be procured from abroad. The government will prioritise domestic procurement but will apply offset requirements where overseas purchases are unavoidable. The approach is designed to strengthen the UK’s industrial base and support economic growth across the country.
The new Offsets policy was announced by the Chancellor and Defence Secretary during a visit to BAE Systems Scotstoun in Glasgow. It forms part of the government’s Back British approach, ensuring that every pound spent on defence procurement delivers tangible benefits to the UK economy. The policy will apply to select procurements from April 2027, with suppliers notified in advance where offset requirements will be enforced. A central Offset Authority will be established to agree, value and monitor delivery through dedicated Offset Agreements.
The UK’s defence economy in Scotland supports 12,200 jobs and is valued at £2.5 billion, with recent deals such as the £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. The government states that every defence investment should be judged by its contribution to British jobs, skills and industrial capacity, even when equipment must be sourced overseas.
Since 2016, over £35.2 billion has been spent on overseas defence contracts, representing 11 per cent of total MOD expenditure with industry between 2016/17 and 2025/26. The new policy ensures future spending of this kind will also support jobs, skills and growth at home. The UK joins allies including Poland, Norway and the Netherlands in using offset policies to maximise economic benefits from defence procurement.