New UK policy requires foreign defense contractors to invest locally for all £50M+ deals

BELFAST — Foreign defense firms that secure contracts with the UK valued at £50 million ($67 million) or more will be mandated to establish British factories, invest in local suppliers and transfer technologies, as part of a newly launched offsets policy.

The oversea contractors “will be required to deliver such benefits to the UK that could reach the same value as the contract” itself, said the UK Ministry of Defence in a statement released today. 

The statement claims the new approach, which is due to come into effect starting April 2027, will make sure that “British workers and businesses still benefit,” from contracts inked with foreign firms, while more generally, the UK government continues to prioritize “buying British defence contracts wherever possible.”

The offsets revamp “will encourage overseas defence suppliers to build enduring partnerships with UK industry, helping UK SMEs to access global supply chains and create new opportunities for growth,” added the statement.

To oversee the effort, the ministry will stand up a new “Offset Authority” to “agree, value and monitor delivery” of multimillion contracts.

Trade body Make UK Defence, representing hundreds of local suppliers, welcomed the move. In a statement to media, a spokesperson for the organization said that the new policy is “an important step towards strengthening our industrial readiness and delivering the Prime Minister’s ambitions to reindustrialise our country.” 

The offset announcement comes amid transatlantic tension as European powers face pressure from US President Donald Trump to do more for their own security, but not at the expense of buying more US-made weapon systems.

An early test of the policy is likely to involve contractor selection for the Skynet 6 Wideband Satellite System (WSS) acquisition, which pits Airbus against US rival Lockheed Martin. A 2023 solicitation notice values the procurement at £1.5 billion, and both companies were asked to submit their final bids in August 2025.

Earlier this month, UK defense secretary Wes Streeting told lawmakers that he could not comment on the procurement as it is “still under investigation.”

Airbus builds and designs satellites from two production sites in Stevenage and Portsmouth, England, and both factories could be endangered should Lockheed win. For its part, Lockheed’s pitch centers around building a new satellite production hub in Durham, England, that could also be used to sustain future export deals.

From a bigger picture perspective, the introduction of the offset policy also follows the UK committing, this week, to a defense spending target of 3 percent GDP in 2030, in line with a longer term plan to hit NATO’s 3.5 percent GDP threshold in 2035.

Based on forecasting from “economists,” the UK newspaper The Times reported on Thursday that reaching the 3 percent figure will cost the government an additional £11 billion per year, with British chancellor and former defense secretary John Healey planning “off the books” funding to prevent raising taxes or cutting public services.

The Times also said that the government is hopeful a four-part treaty with Finland, Poland and the Netherlands could be sorted out in time to be part of plans related to a 2027 government-wide spending review.