Defence contracts to prioritise British jobs and skills

An offsets policy links overseas defence purchases to benefits for the buying country. Under this policy, a foreign company winning a significant UK defence contract must invest in Britain as part of its agreement. The aim is to keep jobs, skills, industrial capacity and innovation at home, even when the equipment itself comes from abroad.

The benefits can take several forms. A contractor might create British jobs and apprenticeships, open or expand a UK factory, invest in domestic suppliers, transfer technology to UK firms, or use more UK-made components. A £100 million contract could therefore require benefits valued at up to £100 million in Britain.

The policy will be considered for overseas contracts worth more than £50 million. A central Offset Authority will agree, value and monitor each commitment through an Offset Agreement. The Ministry of Defence will apply the approach case by case, supporting the wider Back British policy.

The new policy covers overseas defence contracts worth more than £50 million. These contracts will be considered for offset requirements when the Ministry of Defence decides that the approach applies. The policy is part of the Government’s Back British approach and is intended to ensure overseas procurement still supports Britain.

The requirement will be set through a dedicated Offset Agreement. The agreement will specify the benefits the contractor must provide, such as UK jobs, apprenticeships, factory investment, supplier spending, technology transfer or British-made components. The value of those benefits could reach the value of the contract.

The article describes the policy as applying to future overseas spending and says the Ministry of Defence will use it case by case. It does not state a precise start date. A new central Offset Authority will oversee agreements throughout their lifetime, helping ensure consistent delivery and monitoring.

An overseas contractor can meet its offset obligation by delivering economic and industrial benefits in Britain. The permitted routes include creating British jobs and apprenticeships, opening or expanding UK factories, investing in British suppliers, transferring technology and know-how, and using more UK-made components.

The article gives a clear example. If an overseas company wins a £100 million defence contract, it could be required to provide new jobs, facilities or skills training in Britain worth up to £100 million. The benefits do not have to be a cash repayment. They are investments or activities whose value is agreed under the offset arrangement.

A central Offset Authority will agree, value and monitor the commitments. This creates a formal mechanism for checking delivery over the lifetime of each agreement. The policy is intended to help UK SMEs enter global supply chains and create longer-term growth opportunities.

The defence economy in Scotland is worth £2.5 billion and directly supports 12,200 jobs. The article presents Scotland as an important example of defence’s wider economic role, with major contracts supporting local employment and industrial activity.

Across the UK, £34.1 billion of last year’s MOD defence investment went to businesses based in Britain. The article also says that 85% of MOD expenditure already goes to UK firms. This existing spending supported 274,000 jobs in UK industry, 10% more than the year before.

The new offsets policy targets the remaining overseas-linked spending where British purchasing is not possible. Since 2016, more than £35.2 billion has been spent on overseas defence contracts and services. Future spending of this kind is intended to bring additional jobs, skills and growth back to Britain, alongside the Government’s £298 billion, four-year Defence Investment Plan.

The policy is designed to make overseas defence procurement support Britain’s industrial base. Contractors could be required to create jobs and apprenticeships, helping workers gain skills through defence-related activity. New or expanded factories could also increase the UK’s ability to produce and support defence equipment.

British suppliers, including smaller firms, could benefit when overseas contractors invest in domestic supply chains. Contractors may also use more UK-made components or transfer technology and innovation know-how to British companies. The article says these steps could help UK SMEs access global supply chains and create new growth opportunities.

The wider effect could be stronger domestic capability and more enduring partnerships between overseas suppliers and UK industry. Last year, MOD investment supported 274,000 UK industry jobs, while £34.1 billion went to UK-based businesses. The policy aims to add further benefits when contracts must be awarded overseas.

The new central Offset Authority will manage the benefits required from overseas defence contractors. Its role is to make the system consistent rather than leaving every contract to be handled in a completely different way.

The Authority will agree the commitments with contractors through dedicated Offset Agreements. It will value the promised benefits, such as jobs, factory investment, supplier spending, skills training or technology transfer. This valuation matters because the benefits could reach the same value as the original defence contract.

The Authority will also monitor delivery through the lifetime of each arrangement. The Ministry of Defence will still apply the policy case by case, deciding which qualifying overseas contracts should use offsets. Together, these arrangements are intended to ensure that promises made by contractors become measurable and lasting benefits for British workers and businesses.

The article says the government will prioritise buying British defence contracts wherever possible. It does not give specific reasons why an overseas purchase might be necessary. It states only that, when buying defence equipment from overseas is not possible to avoid, the government wants Britain to receive economic and industrial benefits in return.

Offsets provide the mechanism for doing this. An overseas contractor could create British jobs, provide apprenticeships, open a UK factory, invest in domestic suppliers, transfer technology or use UK-made components. For qualifying contracts, those benefits could be worth as much as the contract itself.

This approach treats defence procurement as more than a way to obtain military equipment. It can also support the domestic industrial base, help SMEs join global supply chains and develop skills. The policy builds on existing UK spending, with 85% of MOD expenditure already going to UK firms, and is intended to increase benefits from future overseas contracts.