Foreign defence suppliers will have to invest in the UK under new "offsets" policy

Foreign defence companies that win large contracts with the UK government will be required to invest in Britain, in some cases up to the full value of the contract. The policy, known as "offsets", was announced on 30 October 2026 during a visit to BAE Systems in Scotstoun, Glasgow.

What the rules say

The new rules will cover defence contracts with overseas suppliers worth £50 million or more. According to the government announcement, a company could be required to deliver benefits to the UK worth up to the full value of the order. In the government's example, a £100m contract could mean new jobs, facilities or skills training worth up to £100m.

Companies will be able to meet the commitment in several ways, including:

• creating jobs and apprenticeships,
• opening or expanding factories in the UK,
• investing in British suppliers,
• transferring technology and know-how to UK firms,
• using more UK-made components.

The Ministry of Defence will apply the policy case by case to selected procurements. A new central Offset Authority will agree, value and monitor delivery under offset agreements. The policy will apply from April 2027, and suppliers will be told in advance when a requirement applies to them.

Background

The government says it will buy British wherever possible, under the "Back British" approach set out in the Budget. Offsets are meant to apply when equipment has to be bought from abroad. Since 2016, more than £35.2 billion has been spent on contracts and services with overseas industry, which is 11 per cent of direct MOD spending with industry between 2016/17 and 2025/26. Last year, MOD defence investment supported 274,000 jobs in UK industry, up 10 per cent on the year before. According to the announcement, 85 per cent of MOD spending already goes to UK firms.

Wes Streeting, described in the announcement as Defence Secretary, said: "Every pound we invest in defence should be judged by what it does for Britain."

The government also recalls its target of spending 3 per cent of GDP on defence in 2030 and the NATO commitment of 3.5 per cent in 2035. The UK joins countries that already use similar approaches, which the announcement says include Poland, Norway and the Netherlands.

What this means for you

The changes do not directly affect residence rights, taxes or benefits. However, the government says offsets are meant to bring new jobs, apprenticeships and investment to UK sites. The scale and locations will depend on future contracts and offset agreements, and the policy will only start from April 2027.