How Can Defence Businesses Access Private Capital?

The UK's defence ambitions increasingly depend on more than government spending alone. As pressure grows to accelerate innovation, strengthen supply chains and expand industrial capacity, private capital is becoming a critical component of the defence ecosystem. The UK's Defence Industrial Strategy (DIS) recognises the role that private investment can play in helping defence businesses develop new technologies, scale production and support long-term national security objectives.

For defence businesses, particularly SMEs, scale-ups and companies developing dual-use technologies, this presents a significant opportunity. But attracting investment requires more than an innovative product. Businesses must understand where investors are focusing their attention and what they need to demonstrate to secure funding.

Why is private capital becoming increasingly important to UK defence?

The UK's defence industrial base faces growing demands. Alongside increasing global security challenges, there is a need to speed up innovation, expand manufacturing capacity and strengthen resilience across complex supply chains. While government spending remains the primary driver of activity, public funding alone is unlikely to deliver the scale of investment required.

Private capital can help bridge this gap by providing funding for research and development, production expansion and emerging technologies. It can also help businesses move more quickly from innovation to deployment, supporting the growth of strategically important capabilities across the defence sector.

Why are investors paying more attention to defence businesses?

Defence has become increasingly attractive to investors as governments across Europe and NATO continue to increase defence spending and prioritise national resilience. Greater visibility around long-term defence investment has helped strengthen confidence across the market.

Investor interest is particularly strong in areas where defence and commercial innovation overlap, including:

• Artificial intelligence
• Cyber security
• Space technologies
• Advanced manufacturing
• Autonomous systems
• Secure communications
• Defence software and digital platforms

Many of these technologies have dual-use applications, enabling businesses to access both defence and commercial markets. This broader market potential can make investment opportunities more appealing.

What is preventing more private capital from flowing into the sector?

Despite growing interest, there are still challenges that can deter investment.

Procurement processes remain a key concern. Lengthy timelines and uncertainty around contract opportunities can create barriers for investors seeking confidence around future growth and revenue potential.

Investors can also find it difficult to access reliable market intelligence and understand which technologies and businesses are most closely aligned with future defence priorities. The Royal United Services Institute (RUSI) has highlighted the importance of improving market visibility and strengthening engagement between government and investors.

In addition, defence businesses and investors must navigate complex regulatory requirements, including national security screening, export controls and procurement regulations.

What are investors looking for in defence businesses?

While every investor has different priorities, there are several common themes.

Firstly, businesses need to demonstrate strategic relevance. Investors want to understand how products, services or technologies align with long-term defence requirements and emerging capability needs.

Secondly, scalability matters. Investors are looking for businesses that can grow, increase production capacity and meet future demand. Technology alone is rarely enough without a credible route to commercialisation and expansion.

Strong governance and compliance arrangements are also increasingly important. Businesses that can demonstrate robust management processes, information security controls and regulatory compliance are often better positioned during investment discussions.

How can defence businesses improve their chances of securing investment?

Businesses seeking investment should focus on demonstrating both innovation and commercial readiness.

This includes clearly articulating how their technology addresses defence challenges, identifying growth opportunities and showing how additional capital will support delivery against strategic objectives. Businesses should also consider which type of investor is most appropriate, whether venture capital, private equity, infrastructure funds or strategic investors. Different funding sources have different expectations, investment horizons and risk profiles.

Preparation is also critical. Companies that can provide clear evidence of governance, compliance, operational capability and market demand are likely to be more attractive to investors evaluating opportunities in a competitive market.

What does the future of defence investment look like?

There is growing recognition that stronger collaboration between government, industry and investors will be essential to delivering the UK's defence ambitions. Recent recommendations include improving investor engagement, increasing market transparency and strengthening mechanisms that help direct capital towards strategically important technologies and capabilities.

As procurement reforms progress and defence spending continues to rise, private capital is expected to play an increasingly important role in supporting innovation, industrial growth and national resilience.

For businesses operating across defence, aerospace, cyber security and advanced manufacturing, the opportunity is clear. Those that can combine innovation with commercial scalability, strong governance and a clear understanding of defence priorities are likely to be best positioned to attract investment and support the next generation of defence capability.

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