Sponsored by Lloyds.
As UK defence spending increases and supply chains undergo significant reshoring, a substantial opportunity has emerged for small and medium-sized manufacturers.
In June, the government published its long-awaited Defence Investment Plan, which builds on 2025’s Strategic Defence Review, setting out a 10-year vision for defence spending. It’s a strategy that puts small and medium- sized businesses at the centre of procurement processes.
The Government is committed to engaging more SMEs, prime contractors are actively seeking new suppliers, and you don’t need existing defence credentials to be considered. Indeed, new entrants are valued because they can bring fresh thinking to longstanding challenges.
But supplying the defence sector presents particular challenges, from extra accreditations to elevated security requirements, which can be tricky to navigate.
In response, Lloyds has joined forces with Make UK Defence – the manufacturers’ organisation that champions the UK’s defence supply chain – to create A Practical Guide to Working in Defence.
It’s a free comprehensive introduction to the sector, covering everything from finance to procurement cycles and engagement strategies, and it includes real life insights from businesses that have successfully established themselves in the defence supply chain.
Informed approach
This guide has been informed by talking to UK manufacturers about their ambitions and uncertainties as they explore the defence opportunity.
It’s a great starting point, but there are also many well-established organisations that are working to create practical routes for capable manufacturers to access this expanding market. Joining relevant trade bodies and attending industry events can help build industry knowledge and create valuable connections.
Lloyds works with many of the nation’s regional Aerospace Alliances, including those in the North West, Midlands and West of England, which provide valuable networking opportunities and insights into local supply chains.
And there’s the new Defence Office for Small Business Growth, launched in early 2026 with the aim of making it easier for SMEs to navigate defence procurement, including identifying relevant opportunities and sharing best practice. There are also a number of Regional Defence Clusters across the country.
All these organisations host regular events where businesses can meet and learn from their peers. While secrecy is fundamental in this sector, you’ll find many businesses are willing to share their stories where they can, and these interactions can often provide the most practical insights into the sector’s particular requirements.
Financial support
The crucial point is presenting a thoroughly considered case that demonstrates you are entering this opportunity with your eyes wide open. You don’t need a perfect, finished plan before approaching lenders; what matters is showing you understand the strategy you’re trying to execute and the implications it carries.
The right finance provider should then be able to help structure the most appropriate support around your specific needs.
That might mean working capital facilities to help manage the increased cash flow requirements that come with new contracts. Products like Asset Finance, Hire Purchase, and Capital Import Finance can also work to manage the impact on cash when investing in new machinery before contracts are fully executed.
Lloyds Capital Import Finance is designed to support the purchase of fixed assets, such as capital equipment, by funding the initial period of deposits and staged payments before extending into longer-term financing once the assets have been delivered, installed and commissioned. It’s also worth exploring the British Business Bank’s Growth Guarantee Scheme and UK Export Finance, which can provide additional support options for businesses pursuing defence opportunities.
The publication of the Defence Investment Plan reinforces the scale of the opportunity ahead. In parallel, UK Export Finance (UKEF) has launched a £50 billion Defence Export Fund, increasing its total capacity to £130 billion, to support British defence companies of all sizes, whether they are already exporting or looking to expand internationally.
Lloyds colleagues work closely alongside UKEF to help eligible businesses understand the support available, navigate the application process and secure UKEF backing where appropriate. As more manufacturers explore defence export opportunities, access to joined-up trade support will be critical, helping businesses manage working capital, mitigate risk, and navigate international payments and FX exposure with greater confidence.
That is where specialist trade guidance becomes particularly important. As Ralph Edwards, Head of Trade Commercialisation, Business & Commercial Banking at Lloyds, notes, turning export opportunity into sustainable growth depends on having the right financial support in place. Lloyds is focused on supporting UK businesses with connected trade finance, international payments and FX risk management helping manage risk, protect working capital and trade internationally with greater confidence.
The next step
It’s fair to say that success in defence isn’t necessarily a quick win. Defence contracts can sometimes emerge at a slower pace and building the necessary relationships and credentials can take time. If you’re new to the sector, you need to resource your approach properly and prepare for a long-term commitment.
A fundamental question for any manufacturing business considering defence work is whether this opportunity aligns with your capabilities and strategic direction.
But the sector genuinely needs new entrants who can bring different perspectives and proven manufacturing excellence. The financial support mechanisms are available for viable businesses with solid cases, and the knowledge networks exist to help you navigate entry points and build understanding.
What’s required is thorough preparation, appropriate resourcing, realistic timescales and commitment to building the relationships that underpin success in this sector.
That can translate into real opportunities fo SME manufacturers across the country to use their skills to create innovative solutions, drive growth and build stronger, more resilient businesses.
See how Lloyds is supporting UK manufacturers to innovate, grow, and lead at lloydsbank.com/manufacturing
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