Investments in the UK and European defence and national security sectors have surged in recent years, with both government funding and private capital investments increasing.

Investment funding, primarily driven by venture capital for European defence, security, and resilience startups, reached an all-time high of $5.2 billion in 2024, nearly a fivefold increase over six years. According to a new UK defence investment report from Heligan Group, this boom has been driven by geopolitical tensions and conflict, primarily the Russian war against Ukraine, which has increased demand for defence technology.

Between 2014 and 2024, the UK defence sector experienced a significant rise in turnover, increasing by 64%. Furthermore, combined, the UK's aerospace, defence, security & space sectors employed 443,000 people in 2024 and have turned over £100 billion.

The UK and Germany have emerged as the top destinations for this investment, with the UK consistently attracting the most VC funding in the defence sector since 2019, with Germany pulling ahead in 2024 and France close behind. Notably, Europe launched the NATO Innovation Fund in 2023, a EUR1 billion multi-nation venture fund backed by 24 NATO allies, to invest in dual-use, deep-tech startups that bolster defence capabilities. In parallel, the European Union's European Defence Fund has begun co-financing collaborative R&D projects (worth EUR8 billion over 2021-2027).

Post Brexit, the UK is pursuing its own innovation programs via the National Security Strategic Investment Fund (NSSIF) and accelerators such as the Defence and Security Accelerator (DASA), with innovation centrally coordinated by the newly established UK Defence Innovation organisation.

Matt Croker, Partner, Corporate Finance at Heligan Group, said, "Public-private collaborations fundamentally reduce investment risk for private investors and provide long-term growth prospects, while fostering innovation and building the critical links and understanding between those with the need and those with the solutions. A new UK-EU post-Brexit agreement also paves the way for UK-based firms' access to the EU's new Security Action for Europe (SAFE) - a EUR150 billion fund providing loans for defence projects. Subsequently, I believe that the long-term stability and resilience of investments in defence are improved due to a sector strongly influenced by geopolitical necessity and one that is financially backed with governmental support.

"Private Equity (PE) and corporate investors are also playing a significant role. Large defence contractors are reinvesting profits into R&D, and we are seeing more acquisition plays of innovative firms, such as the 2024 acquisition of SixWorksby IBM for $150 million from Chiltern Capital, while PE firms have made headline acquisitions of UK defence companies."

Mainstream investors have historically shied away from pure "kinetic" investments, such as weapon systems, due to ethical and ESG concerns. There is, however, a blurring of those traditional lines with a greater focus on dual-use tech such as AI, cybersecurity, autonomous systems, and quantum, which have both strong enterprise value as well as significant opportunities for the defence and national security sector. There is also a tangible realignment of ethical and ESG lines, with many seeing a momentum shift, with attitudes to defence and security investing now framed as essential for societal security and stability in the context of war in Eastern Europe. This has resulted in a growing pool of capital for defence startups, scale-ups, and proto-primes.

"With heightened threat levels, institutional investors would appear to be loosening restrictions and recognising defence as a critical and necessary aspect of the overall investment landscape, as well as a potentially untapped and lucrative addition to their investment portfolios", added Croker.

"Public investment is rising too. On top of the UK Government's commitment to raise defence spending to 2.5% of GDP by 2027, the UK Ministry of Defence (MOD) also plans to dedicate at least 7% of its budget to R&D by 2030 (up from 4% today), nearly doubling annual defence science spending to around £4 billion. Together, these trends indicate robust confidence in defence tech, with government funding, NATO and EU initiatives, and private VC and PE money all converging to drive innovation. It should also be noted that turnover in the UK defence sector has grown 31% over the last ten years, with a large part of that growth occurring in the last 3 years."

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Notes to editors

About Heligan Group

Heligan Group is an intelligence-led investment and advisory group specialising in partnering with businesses that contribute to global safety and security. With a growing presence across various geographies, Heligan Group stands as a leader in its field, combining expertise with innovation.

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