Defence Investment and Industrial Growth: Why the DIP Matters
Last week, news of a fresh resignation from Keir Starmer’s cabinet rocked Westminster. In protest over the emerging Defence Investment Plan (DIP), Secretary of State for Defence John Healey resigned.
Within his letter of resignation, Healey told the Prime Minister “you have been unable, and the Treasury has been unwilling, to commit the resources that the nation needs to defend the country at this time of rising threats”.
At the centre of this claim is reportedly a £4.5 billion gap between the £18 billion of additional investment Healey wanted, and the £13.5 billion the Treasury have produced. In a war of words in the aftermath, Treasury sources reportedly accused Healey of wanting cuts to libraries to fund defence, highlighting a wider tension within government on the fiscal trade-offs to increase defence spending.
For industry, the scale of investment is one of two major problems with the emerging DIP.
Initially promised for Autumn 2025, the DIP is now promised by 7 July, some seven months late. These delays have a direct impact on investor confidence, and particularly on SMEs which remain more vulnerable.
In a survey by techUK, 73% of technology companies with MoD contracts report suspended or cancelled contracts, and 87% have seen delays or cuts to their funding since the Strategic Defence Review was published in June 2025. This damages the UK’s industrial base as smaller employers are pushed to shed staff or capabilities while waiting for the investment promised by government.
Parliamentarians also suggest the delays undermine the UK’s standing among its allies. Upon joining the Global Combat Aircraft Programme (Tempest) with Italy and Japan to produce a new sixth generation fighter jet, the UK funding was limited to only three months while awaiting the new DIP.
However, there are reasons to be optimistic for those of us in the development sector looking to support investment in sovereign capabilities and the defence industry.
Ministers have committed to the DIP providing much-needed investment into MoD estates, accommodation and growth in industrial capacity. This includes £7 billion committed for military accommodation, a further £1.5 billion for rapid investment in forces housing, and £6 billion towards six new munitions and energetics factories.
This would be a recognition that investment in defence cannot be limited to hardware and capabilities, it must also include the readiness of the wider defence estate and infrastructure.
On 11 June 2026, Dan Jarvis MP took the reins as the new Secretary of State for Defence. Within days, allies of Jarvis were quoted in the Guardian touting a ‘reprioritising’ of the DIP. With that, there may be further change to the plan just 16 working days before the forthcoming NATO summit, raising the risk of yet further delay.
While uncertainty over the DIP persists, the defence industry and particularly SMEs will find it increasingly hard to plan their cashflow, investments and capability growth.
