Defence procurement: more money, the same front door.

Why look at defence now

Defence is where public money is moving. The government has committed to spend 2.5% of national income on defence from April 2027, and signed up at NATO in June 2025 to 3.5%, plus 1.5% on wider security, by 2035. In the October 2026 Budget the Chancellor added an aim of 3% by 2030, with the path to be set out at the next spending review. Each extra 0.1% of national income is roughly £3bn a year.

The Defence Investment Plan, which sets out what that money buys, finally arrived on 30 June 2026, about nine months late. The wait cost a Defence Secretary, John Healey, who resigned over its funding, and has been blamed for the collapse of the jet-trainer start-up Aeralis (Scottish Affairs Committee). The plan includes £5bn for drones and £100m for a defence AI taskforce.

Ministers have also said they want the money to reach new suppliers. The Strategic Defence Review of June 2025 promised at least 10% of the equipment budget for novel technologies, and a new body, UK Defence Innovation, with a ring-fenced £400m a year. The MOD’s small business action plan aims to lift its spending with small firms, directly and through the supply chain, from about £5bn a year to £7.5bn by summer 2028. A £20m fund, run by UK Defence Innovation, gives fast-track contracts to start-ups with little MOD history.

The MOD’s own figures show how far there is to go. In 2025/26 it paid £43.4bn to industry. BAE Systems alone took 16.5% and the top ten suppliers 40%. 47% of the money went on contracts placed without competition. Small firms got about 4% directly (MOD trade, industry and contracts 2026).

It is a topic government talks about a lot. In Analysis No. 2, defence and the armed forces took 6.4% of government’s weighted attention since July 2024, more than any issue bar the economy. So we asked two questions of the contract record. Is the MOD buying differently? And are start-ups getting in?

The MOD publishes few contracts, and its share is shrinking

The MOD and its agencies posted 2,129 contract awards on Find a Tender between January 2021 and 4 November 2026. That is a small slice of the register, and a falling one: 3.0% of all awards in 2021, 1.3% in 2026.

Since the Act, 34% of MOD awards stating a value were under £215,000, against 65% elsewhere. A typical MOD award in 2025–26 was £636k, against £98k across the rest of government.

This matters for anyone trying to read the market. Much defence buying never appears here at all. Contracts can be withheld for national security, and much of the biggest work is placed directly with a single supplier under separate rules. The register shows the part of defence procurement that is open to view, which is also the part a newcomer can most easily enter.

What the MOD buys: more training and software, fewer drones

We sorted the MOD’s contract titles into 16 themes. Comparing 2021–22 with 2025–26, the themes gaining most ground are training and simulation, nuclear and AI, data and software. Those losing most are fuel, food and logistics, weapons and munitions and drones and uncrewed systems.

New technology has not grown. Titles touching drones, AI and software, cyber, space or research made up 10.0% of MOD awards in 2021–22 and 8.5% in 2025–26. Drone and uncrewed-system awards peaked at 16 in 2022; there were 6 in 2025 and 8 so far in 2026. That chimes with Analysis No. 1, where defence was one of the slowest-growing of 24 themes across all public buyers.

There are good reasons to be careful here. Some drone buying goes through urgent routes, Ukraine support or partners abroad, none of which shows up on this register. And a title such as “Project Corvus” tells you little unless you already know it. But on the published record, the shift to new technology that the Defence Review promised has not yet arrived.

Who wins: a long tail, and fewer newcomers than elsewhere

By count, MOD contracts are spread widely. 1,270 different firms have won at least one, and the ten most frequent winners hold 8% of wins. 66% of MOD suppliers have won only once.

Counting notices flatters small firms, because a single frigate or munitions deal counts the same as a contract for gym kit. Among MOD awards worth £10m or more, the big defence, engineering and consulting groups took 33% of wins in 2026, against 15% of all MOD wins.

The clearest sign of a closed market is how often a buyer goes back to firms it knows. In 2026, 56% of MOD wins went to a supplier it had not used in the previous three years. Across other public buyers the figure was 70%. Put another way, four in ten MOD contracts go to a firm the department already knows, against three in ten elsewhere. The MOD’s own statistics point the same way: by number, 51% of its new contracts in 2025/26 were placed without competition.

Can start-ups and scale-ups get in?

Using the same test as Analysis No. 1 (a company under ten years old when it won, the same test as the Start-up Access Index), start-ups and scale-ups took 5.6% of MOD wins in 2025–26. That is below the 6.9% they took across the rest of government, school and patient transport aside.

44 different start-ups and scale-ups won MOD work in 2025–26. A typical award to one was £541k, against £632k for an older firm. 13% of their MOD wins were in the new-technology themes, which is where the Defence Review says the money should go.

The contract record matches who gets in the room. In Analysis No. 7, a big corporate was in 35% of the MOD ministers’ meetings we could read, the highest share of any department. A start-up was in 1.8%: 22 meetings.

Those that do break in wait. Among 31 small companies set up since 2021 that have won an MOD contract, half took 1.7 years or more from incorporation to their first win.

What is coming

Under the Procurement Act, big buyers must publish pipeline notices setting out what they expect to buy. As at 4 November 2026, the MOD and its agencies had 65 pipeline, market-engagement or planned-procurement notices still ahead, and 34 tenders open on the register.

Of those, 5 touch the new-technology themes. Market engagement is the stage where a small firm has the most influence, because the requirement is still being written.