Sir Keir Starmer faces losing British defence firms to rival economies as bosses look to flee abroad.
Defence firms have warned the Government that it could face imminent supply chain collapse unless the industry received an emergency cash injection.
Scores of British companies have already drawn up plans to relocate to the US, which offers perks such as reduced income tax to attract business.
They have said firms could be forced to quit Britain unless Sir Keir publishes the Government’s delayed 10-year defence investment plan.
However, it is understood that the Government does not have any imminent plans to publish the report, which was due more than six months ago, prompting uncertainty.
The report, expected to outline the Ministry of Defence’s budgeting priorities, would allow companies to anticipate where the Government plans to invest its Armed Forces spending.
On Saturday, Robert Taylor, a former Royal Marine and founder of military technology company 4GD, urged the Government to publish the plan. He is one of several defence leaders considering relocating his company to the US unless urgent action is taken.
He told The Telegraph, he said: “SME defence companies are moving out the UK or out the market and at least two companies in my direct supply chain have gone into administration in the last three months.
“I am seriously considering moving my business to the United States. The Americans back their rhetoric up with legislation, governance and rules. If I move my business there, they offer all sorts of perks.
“For example, in Florida, I am being offered state-matched funding of up to £2m and in North Carolina, they are offering half income tax for the first two years. Meanwhile, the UK is offering no protectionism for British companies.”
Asked about whether he thought the Government should be concerned about the collapse of Britain’s defence industry, Mr Taylor said: “Not keeping your defence supply chain alive, even if you are concerned about fraud, is to me insanity. Get the money in now. If the defence investment plan does not come out in the next few months, we are done. There is no industry.”
In recent months, several defence adjacent firms, such as Altitude Angel, have gone into administration, with others thought to be months away from folding. Others are already laying off staff.
Some 42 defence companies have collapsed in the last 10 years, government data shows.
‘The UK’s cupboards are bare’
Matthew Williams, a former Royal Marine and CEO of tactical apparel procurement firm Brigantes, said he had also considered moving to the US but is determined to stay for now.
“We had the paperwork ready to move our entire operation to the United States because the financial environment there is more realistic,” he explained.
“Global conflict had seen demand soar, but the UK’s cupboards are bare. We aren’t currently provisioned for the operations we need to lead. We aren’t looking for a handout – we’re looking for a fair deal.
“The Government should underwrite debt risk so that proven suppliers can borrow from banks more easily. It can take years to get committed orders after securing a contract, and small businesses shouldn’t have to face closure while waiting to deliver for the front line.”
Several Labour MPs are urging the Government to join a multilateral “defence bank”, proposed to Sir Keir by Mark Carney, the Canadian prime minister. A defence bank would allow allied countries to borrow money for military procurement at a lower cost.
‘Clear impact on business confidence’
Andrew Kinniburgh, the Make UK Defence director-general, is expected to raise the impact of delays to the defence investment plan at a defence select committee hearing on Tuesday.
He said: “Delays to publishing the defence investment plan and spending shortfalls are having a clear impact on business confidence. This is forcing SMEs into an impossible situation to either lay off staff, move their business abroad or go bust because there’s no work.
“The Government needs to set out a plan to urgently accelerate defence spending to our new Nato target of 3.5 per cent and publish the long-awaited defence investment plan. This will provide certainty to businesses, encourage SMEs to stay in the UK and unlock private investment currently being held up.”
An MoD spokesman said: “We are getting on with the job of ensuring defence is an engine for growth by backing British jobs, British industry and British innovation. Since July 2024, we have signed 1,200 major contracts, and 84 per cent of our annual spend goes to British-based businesses.
“Earlier this year, we launched a dedicated Defence Office for Small Business Growth to boost opportunities and access, on top of our commitment to increase spending with SMEs by £2.5bn by May 2028.
They said the Government “had overseen the biggest uplift in defence spending since the Cold War, with £270bn investment across this Parliament”, adding: “We are working flat out to finalise the defence investment plan, and will publish it as soon as possible.”