The UK government is preparing to place defence manufacturing and major infrastructure projects at the heart of its drive to revive industrial growth, with Finance Minister John Healey set
to outline the strategy at the Labour Party’s annual conference.
Healey is expected to argue that a sustained programme of defence investment can do more than strengthen Britain’s military capabilities. The government wants the spending to support domestic manufacturers, create skilled employment and help rebuild industrial capacity across regions that have experienced decades of economic decline.
The speech marks Healey’s first Labour conference appearance as finance minister and is intended to give greater substance to Prime Minister Andy Burnham’s pledge to launch a new era of British reindustrialisation.
Healey is expected to point to large defence programmes as examples of how public investment could generate wider economic benefits. Among the projects highlighted are plans for three new floating submarine-support docks on the Clyde in Scotland, involving substantial investment in British shipyards and related supply chains.
“By backing British shipyards, we are not only boosting national security but also securing resilience in the industries that will drive growth today while building the capabilities the country needs for the future,” Healey said.
The government’s approach reflects an effort to link national security with economic policy. Under the emerging strategy, defence contracts would be used to strengthen domestic production, develop specialist skills and maintain critical industrial capabilities inside the UK.
Defence spending as an engine for jobs
The administration sees reindustrialisation as one possible route to addressing several economic pressures simultaneously. New investment could support employment, increase demand for British-made goods and potentially reduce the long-term cost of unemployment and welfare support.
Defence Minister Wes Streeting has similarly argued that military spending should deliver broader economic benefits, particularly when procurement can be directed towards companies and workers based in Britain.
“Defence spending should make Britain stronger in every sense,” Streeting said, adding that the government intends to support British suppliers where domestic industry has the capacity to deliver.
The strategy comes as the government faces difficult choices over public spending. Burnham has promised measures aimed at easing household cost pressures, while higher energy costs linked to conflict in the Middle East are adding to economic uncertainty.
At the same time, the Treasury is preparing for Healey’s first budget on October 28, limiting the scope for large-scale new commitments without corresponding decisions on taxation, borrowing or spending priorities.
Pressure to expand military investment
Defence policy presents another significant financial challenge. The government faces a reported £4.7 billion shortfall in its Defence Investment Plan, while military analysts have questioned whether existing commitments are sufficient to meet the country’s longer-term defence ambitions.
Burnham has pledged to increase core defence spending to 3.5% of GDP by 2035, in line with the government’s interpretation of its NATO commitments. However, the administration has not yet provided a final timetable for reaching an intermediate 3% of GDP target by 2030.
That issue is particularly significant for Healey. Before becoming finance minister, he served as defence minister but resigned in June after disagreements over the pace and scale of defence spending. The 3% target was among the positions he had sought to advance while serving in the defence portfolio.
His new role therefore places him at the centre of a policy dilemma: increasing defence investment could provide a significant stimulus to British manufacturing, but it also places additional pressure on already constrained public finances.
For the government, the broader industrial strategy will depend on whether defence procurement can generate sustained investment beyond individual contracts. The objective is to build a network of manufacturers, shipyards, engineers and specialist suppliers capable of supporting both military requirements and wider economic activity.
The approach represents a shift towards viewing defence expenditure not simply as a security cost, but as part of a wider industrial policy designed to strengthen domestic production and create skilled employment.
Whether that strategy can translate higher public investment into faster productivity growth and a durable expansion of Britain's industrial base will become one of the key tests of the government's economic programme. Photo by Lauren Hurley / No 10 Downing Street, Wikimedia commons.
