Michael Fallon hints post-EU referendum slump could hit defence spending
Michael Fallon has hinted that the fall in sterling following the EU referendum could lead to real terms cuts to the defence budget.
The Defence Secretary said the Government must take into account the changes to Britain's finances since the Brexit vote.
Last year the UK spent 2.21% of national income on defence, above its 2% target.
However, Mr Fallon warned that exchange rate fluctuations following Britain's decision to leave the EU could lead to a real terms spending reduction.
He said: “It’s right that we look again at the overall context, the way some threats have intensified in a way that we did not predict and indeed some of the other things that have happened...the referendum of course was not forecast in the strategic defence review and the implications of that referendum, for example, on the exchange rate are something that we will eventually have to take into account as well.”
Last year the former head of the navy, Admiral Lord West, warned the defence budget faces a “perfect storm” due to financial turmoil following the Brexit vote.
He said underfunding for the military coupled with a falling pound and large-scale procurement from America would create a “huge black hole” in the MoD budget.