Britain must join the new world bank for defence
4 min read
The UK would regret turning down the opportunity to sit at the table.
The key to unlocking more defence investment lies in the former defence secretary’s resignation letter. John Healey argued that in a more dangerous world, we need credible ways to meet the defence funding challenge by working multilaterally with our allies. He was right.
For too long, our defence debate has focused on percentages of GDP and Treasury settlements. But unless we get that capital moving across our supply chain, it won’t be enough. Budgets do not build factories. Industrial capacity does.
That is why I have spent the past 18 months leading the campaign in Parliament for the UK to co-found the Defence, Security and Resilience Bank (DSRB).
At next month’s NATO summit, Canadian Prime Minister Mark Carney and our allies are set to sign the Charter establishing the DSRB. If they do, it will be one of the most significant institutions in transatlantic security for a generation. Britain should be at the table.
Some have portrayed the DSRB as little more than an SME finance initiative. That misses the point. The Bank may begin with SMEs, but its purpose is to strengthen the whole defence industrial ecosystem, from start-ups and specialist manufacturers to prime contractors and governments. Its mandate spans research and development, industrial expansion, credit guarantees, private capital mobilisation and sovereign lending.
In short, it is designed to turn political commitments into industrial output.
Across the defence sector, companies face two linked challenges: access to capital, and confidence in future demand. Without finance, firms cannot expand. Without demand, they will not. Initiatives like the Multilateral Defence Mechanism can help coordinate procurement and signal demand with allies, but they do not solve the finance problem. The DSRB does.
Britain needs both: clearer demand, and the capital to turn it into real defence capacity.
Together, they create the conditions for more factories, jobs, exports, innovation and resilient supply chains. That is not merely defence policy. It is industrial policy.
The DSRB is being created by sovereign nations for sovereign nations. Its financing will be directed towards companies based within participating member states. Countries contributing capital will see that capital supporting jobs, investment and growth in the nations that join.
The risk for Britain is obvious. If we are left outside this institution, British companies could be shut out of a growing pool of allied defence finance. Factories, production lines and technologies financed through the Bank will increasingly be concentrated within member nations.
At a moment when the government is searching for growth, excluding British firms from this new ecosystem of allied defence investment would be an extraordinary decision. It is one we would regret.
Britain’s frustration with limited participation in the European Union’s SAFE programme should serve as a warning. When new institutions are created, the rules are shaped by those at the table.
The terms are favourable. Britain’s contribution would be €1bn over three years, around €500m below what it would have been under the standard GDP-based formula, following a G7 discount secured during the Charter negotiations.
Participation in the DSRB is an investment. Britain would be purchasing equity in a new multilateral bank designed to finance allied industrial growth, defence production and economic resilience. The UK’s paid-in contribution could be provided through the National Wealth Fund in exchange for an ownership stake, with no need for further departmental cuts or additional borrowing to fund our capital contribution.
The DSRB also creates something different from borrowing more through the gilt market: a AAA-rated multilateral borrowing platform backed by multiple allied governments. It gives Britain access to another source of long-term capital, with more options, more flexibility and potentially lower financing costs.
If we seize this opportunity now, Britain could secure real influence over the Bank’s direction, reinforce London’s role as a global financial centre, and support the defence industrial base our Armed Forces depend on.
The question is not whether Britain can afford to participate.
It is whether we can afford not to.
Alex Baker is the Labour MP for Aldershot
