The Strategic Defence Review in the UK: how it affects startups and the tech sector
We look at the pros and cons of the UK's Strategic Defence Review, which was published yesterday
Yesterday saw the publication of the UK Government’s much awaited Strategic Defence Review (SDR). You can read it here. We are interested to see how it impacts on startups and the tech sector.
A founding principle at Resilience Media is that we are at war and that the tech sector has an important role to play in defence. With that in mind, we welcome Prime Minister Kier Starmer beginning to talk openly about the threat to this nation. Without recognising the threat, we cannot expect to mobilise society to support the response.
It is good to see a political focus on defence and a recognition of the need for serious innovation in how we approach national security. The SDR is a Strategic review not a Tactical review, so it is the beginning of a discussion. Resilience Media will continue to track the progress, and will be exploring it further in our writing and at our events. Below, we look at some of the pros and cons of what is in the review.
PRO: the SDR acknowledges startups
To win this war, the tech sector needs to support defence and national security and government officials working on tech and innovation need to build closer ties into the tech sector. General Sir Richard Barrons, one of the authors of the SDR, told us today that:
“the Strategic Defence Review 2025 represents a once-in-a-generation opportunity for start-ups and small, medium-sized enterprises to play a transformative role in the UK’s defence future. By dismantling outdated procurement cycles and embracing innovation as a core principle, the SDR will unlock unprecedented pathways for commercial ideas to become integral to our national security. This is a bold invitation for the UK’s most dynamic and inventive companies to lead the charge in modernising the Armed Forces, driving economic growth, and exporting British innovation to the world.”
We welcome Sir Richard’s emphasis on reforming procurement to support greater activity by startups and scale-ups in defence. Ukraine has clearly shown that startups and the tech sector have a critical role to play in defence and national security.
CON: 3% is ‘subject to economic and fiscal conditions’
The government’s aim to reach 3% spending on defence in the next parliament is ‘subject to economic and fiscal conditions.’
We have seen in Ukraine, and in countries like Estonia, that our adversaries neither respect nor support our economic and fiscal stability. Unfortunately, we will need to meet these commitments regardless, and most likely the more we need to spend on defence, the worse the economic environment around us will be. This is likely to impact on innovation rather than large programs.
A senior defence source familiar with procurement, told us that, “the historical tendency for cost overruns, particularly in nuclear-related programmes, could lead to innovation initiatives being stripped away as budgets tighten.”
PRO: Drive innovation at wartime pace
We have been talking about the need to shift from peacetime innovation to wartime innovation. We are pleased to see the SDR talk about needing to “drive innovation at a wartime pace.” We are also glad the review acknowledges that “defence’s wider ways of working remain suited to a peacetime era, with innovation stifled and bureaucracy consuming precious time and effort.” The authors refer to “Cold War-era procurement cycles and relationships with industry.” Acknowledging this is an important first step to addressing it.
A topic we addressed at our event in Munich is the underlying industrial base that will support all this defence innovation. We need significant innovation in how we build things, not just in what we build. Echoing this important point, one of the founders working on just that innovation, Alexander Fitzgerald, CEO of Isembard told us, “Ukraine will produce 10m drones this year. Our collective security relies on accelerating production for critical industries.”
PRO: £400M earmarked to fund and grow UK-based companies
What has most caught the focus of the tech sector is the establishment of UK Defence Innovation, “with £400m to fund and grow UK-based companies.” In particular, we welcome the suggestion that “at least 10% of the MOD’s equipment procurement budget is spent on novel technologies’ each year.” However, a lot will rest on who is deciding what ‘novel technologies’ means; it is likely to mean very different things to a career civil servant compared to a VC.
The UK needs a "go faster plan." John Tang, AI Advisor to the Investment Sector, shared this recommendation: “if we are to bring in industry innovation and venture and growth capital, we need stronger demand signals today from MOD on AI. The MOD should more openly publish an AI Requirements List so investors can focus their efforts.”
PRO: Pace of technological change
We also recognise the reference to how “risk reduction and consensus decision-making are prioritised over productivity and innovation at the pace of technological change.” Again, this speaks to changes to the deep culture within defence and national security, and leans into how the tech sector already works.
War brings that change, and in Ukraine it has also been supported by more tech sector entrepreneurs engaging in defence. Nicholas Nelson, General Partner at Archangel told us that "new entities and ring fenced funding are a start; however, MOD needs to be empowered to pick winners in order to drive UK growth and develop true UK defence tech challenger primes."
CON: MoD organisation capable of new ways of working?
A senior source familiar with MOD innovation commented to us, “while the SDR emphasises the need for new ways of working, it lacks specifics on incentives, accountability mechanisms, or change management strategies.” How we address deep-set culture as fast as the SDR recommends remains to be addressed and could undermine the ambitions.
Dr John Tang, feels that “we should be concerned by the admission that Defence has not yet made the organisational and cultural change necessary for success.”
Grace Cassy, member of the SDR panel made a similar comment in a piece published by Chatham House. “Citizens, parliament and the media must also walk this path, accepting that the new world requires different ways of thinking about risk. If a new sensor or drone cannot deliver a ten-year value for money statement, or becomes obsolete in months, that is not a failure. It is the new reality given the pace of development in technology and especially AI.”
PRO: ‘A concerted effort to unlock private capital’
The review talks about needing a “concerted effort to unlock private capital and expertise … Defence must develop better relationships with, and understanding of, the financial services sector. New funding models should be explored to make defence innovators a more attractive proposition for private capital, reduce the cost of finance for defence companies, and increase the ability to pool capital with allies.”
Responding to this, Rob Murray, CEO, DSR Bank Development Group, reflected that, “what comes next is the urgent task of building a modern financial architecture for defence: one that starts with the DSR Bank and brings in private equity, venture capital, institutional capital and commercial banks. This is about more than spending — it’s about strategy, scale, and a serious shift in how we finance security.”
We will continue to monitor how the SDR debate unfolds, and look forward to tracking actions and progress in the coming months and more.
