The UK has unveiled a £2bn funding boost for the country’s export credit agency aimed at boosting foreign sales of defence goods such as missiles, aircraft and armoured vehicles to allied partners.
The move, announced by UK Chancellor Rachel Reeves on a visit to Scotland today, will grow the direct lending capacity of UK Export Finance (UKEF) from £8bn to £10bn.
It follows a UK pledge to grow defence spending to 2.5% of GDP by 2027 and comes amid a flurry of export finance activity in the defence sector, driven by Russia’s ongoing military threat in Ukraine and fears of dwindling US support.
“The world is changing, and we must bring about a new era of security and renewal that protects working people and keeps our country safe,” Reeves said, according to a Treasury statement.
According to the Treasury, the funds will “unlock orders from allies” and increase the UK’s competitiveness in the defence sector.
Export finance banks – which work in tandem with export credit agencies such as UKEF – say activity is booming in the defence industry on the back of heightened geopolitical tensions.
UKEF’s direct lending facility allows it to provide loans to foreign governments, propping up contracts with UK exporters. But it is also a major backer of defence deals through bank guarantees.
As reported by GTR in late 2024, UKEF provided some £9bn in guarantees to help Poland build a missile defence system as the country looks to bolster its armed forces.
Earlier this month, Prime Minister Keir Starmer announced a £1.6bn UKEF guarantee for Ukraine tied to the sale of missiles from the Belfast factory of defence manufacturer Thales.
More broadly, US President Donald Trump is urging Nato members to increase defence spending to 5% of GDP, prompting calls for innovative state-backed financing solutions.
In recent weeks, Nato’s former head of innovation has outlined plans to establish a defence-focused multilateral development bank (MDB), which aims to plug financing gaps for European buyers and suppliers.
