Budget 2026: What It Means for Defence and Resilience

Budget 2026: what it means for defence and resilience

Ahead of the Budget, we set out three priorities: a credible defence funding trajectory, investment in interconnected national resilience, and practical measures to mobilise private capital. Wednesday’s announcements provide a stronger foundation across these areas, although important questions remain about implementation and the balance of investment.

First, there is greater clarity on defence funding. The Government has set a target of reaching 3% of GDP by 2030. The detailed pathway towards this and NATO’s 3.5% core-defence commitment by 2035 will follow at next year’s Spending Review.

The Budget also confirms how the remaining £4.7bn of the Defence Investment Plan will be funded. This completes financing for an existing commitment, rather than creating a separate £4.7bn programme.

That distinction matters. £3bn of this amount comes from further reductions in departmental capital budgets, with £1.7bn drawn from the Treasury’s capital Reserve. Defence gains must therefore be considered alongside the implications for other investment priorities.

For businesses and investors, the clearer timetable is welcome. The next test is whether the Spending Review provides sufficient detail to support investment decisions over several years.

Second, the Budget confirms specific measures to strengthen cyber resilience. These include a £60m National Cyber Shield and a £70m National Exposure and Real-Time Vulnerability Centre. Both were announced on 24 October, ahead of the Budget. The £25m challenge fund for AI and cyber security innovation sits within the Cyber Shield allocation.

These initiatives part of our call for investment in the systems underpinning national security and everyday life. They could also support British companies developing technologies to protect essential services.

However, cyber security is one part of a wider challenge. The interdependence of energy, water, food, communications and transport is a bigger and more complex issue than this spending targets. We need a coherent approach that addresses vulnerabilities and leverages strengths across these systems. We cannot simply reallocate capital to prioritise a single salient issue; we need a stronger assessment and articulation of the sum total of the Government’s spending decisions across departments.

Third, the Budget does strengthen the role of public finance in mobilising private investment. The National Wealth Fund and British Business Bank will deploy up to £5bn over four years into defence, dual-use and other sectors supporting security and resilience. A new Innovative Defence Financing Taskforce will examine the contribution of private and international finance.

The British Business Bank also confirms £1.4bn of additional equity-fund capacity and £450m for a new venture-debt product, including support for defence and dual-use businesses. These measures address our point that companies need different forms of capital as they develop and grow.

For companies, eligibility and access will matter. For investors, the opportunities must still demonstrate commercial viability, credible management and an appropriate allocation of risk. The announced financial capacity will become meaningful when it supports investable businesses and projects; more transparent Government procurement processes would help connect capital to the right businesses.

The Budget has moved the discussion forward through firmer targets, confirmed funding and broader financing tools. The priority now is to translate these commitments into the three tests we set before today’s announcement: industrial capacity, stronger essential systems and private investment that supports Britain’s long-term security.