Overseas winners of UK defence contracts of £50m or more to be considered for offsets from April 2027

Overseas companies that win UK defence contracts worth £50m or more may have to deliver UK benefits worth up to the same amount, under an offsets policy launched by the Ministry of Defence and the Treasury on Friday.

A £100m contract, for example, could bring new jobs, facilities or skills training worth as much as £100m. Suppliers would be able to meet the obligation in several ways, including apprenticeships, UK factories, investment in British suppliers, technology transfer and using more UK-made components.

The rules start small. They will apply to a select number of procurements from April 2027, and the Ministry of Defence will decide on a case-by-case basis. Suppliers are to be told early whether a requirement applies to them.

How it will be run

A new central Offset Authority will agree each package, put a value on it and monitor delivery through formal Offset Agreements.

The government said it would still buy British wherever possible, and that the policy was meant for cases where equipment has to come from abroad. Since 2016, more than £35.2bn has been spent on overseas defence contracts and services, which it put at 11% of the Ministry of Defence's direct spending with industry and commerce between 2016-17 and 2025-26.

Most of that budget already stays at home. The government said 85% of Ministry of Defence spending goes to UK firms, with £34.1bn going to UK-based businesses last year, and that its investment supported 274,000 jobs in UK industry, up 10% on the year before.

Poland, Norway and the Netherlands already use similar arrangements, and the UK has started treaty negotiations with the Netherlands, Poland and Finland on a Multilateral Defence Mechanism.

The announcement builds on the Back British approach set out in the Budget. It comes alongside the government's target of spending 3% of GDP on defence in 2030, on the way to the 3.5% NATO commitment for 2035.