Foreign Defence Contractors to Be Required to Invest in UK Under New Offset Rules

Foreign companies awarded large UK defence contracts will be required to invest an equivalent sum back into Britain under new rules announced by Defence Secretary Wes Streeting. The measures, described by the government as its "offset strategy", will apply to contracts worth more than £50m. Companies receiving such awards will need to spend the same value on British factories, jobs and training, with the Ministry of Defence applying the rules on a case-by-case basis from April 2027. The government said the policy is intended to increase investment in Britain's defence industry and ensure that where it must buy equipment from overseas, British workers and businesses still benefit. It added that the government is prioritising buying British defence contracts wherever possible. Streeting told BBC Breakfast the rules would help deliver value from the defence budget, saying the aim was to get "benefit for Britain, bang for the British buck back here at home" on the most valuable contracts. He said the approach matters because higher defence spending "does come at a cost to the country and other things we'd like to spend money on". The announcement comes as the government faces pressure over its target of spending 3% of GDP on defence by 2030, an objective some opposition MPs and defence analysts have questioned its ability to meet. Some estimates suggest the government would need to spend an additional £10bn annually to reach the 3% target by the end of the decade, and to match the Nato-wide commitment of spending 3.5% of national income by 2035. Streeting and Chancellor John Healey will unveil the rules during a visit to the shipbuilding site of defence contractor BAE in Glasgow. The government noted that countries including Poland, Norway and the Netherlands have mandated similar rules to boost the economic benefit from defence procurement. The announcement drew criticism from within Parliament. Tan Dhesi, the Labour chair of the Commons defence select committee, said key decisions had been "lamentably delayed" to next year's spending review rather than being announced in Wednesday's Budget. "We need to urgently rebuild our capabilities now, or we risk leaving ourselves seriously vulnerable in the event of a major conflict," he said. Conservative leader Kemi Badenoch said on Wednesday that Healey "failed his own test" by not setting out a "plan for 3%" in the Budget. Streeting rejected the criticism, saying he "strongly disagrees" with Dhesi and insisting the government was not "kicking the can down the road" on defence. He said delaying detail to the spending review was "the right thing to do" so ministers can consider "spending in the round", adding: "I think we're doing as much as we can, as fast as we can... of course there is more to do." He acknowledged that the UK is not where it would want to be on defence readiness, saying: "There's no sugarcoating the fact that our Armed Forces were under-invested in for more than a decade." Healey resigned as defence secretary in June, saying at the time that the then prime minister's proposed defence investment fell "well short of what is required for defence and the country at this dangerous time".