Budget 2020: breakdown for defence suppliers

The newly elected Conservative government’s Budget was announced on the 11 March 2020.

Delivered by the new Chancellor Rishi Sunak, the Budget 2020 announcement was dominated by the impact of the Coronavirus on the UK economy.

The Chancellor said that the measures introduced in his Budget “will make the UK one of the best placed economies in the world to manage the potential impact of the virus”.

Mr Sunak did not directly reference defence figures during his speech. However, HM Treasury calculations revealed defence spending will total £55 billion for 2020/2021, with an additional £100 million to be invested in defence research and development.


Coronavirus announcements

The Coronavirus pandemic formed a large part of the first post-Brexit Budget announcement. Mr Sunak acknowledged that the UK economy will be temporarily disrupted by the virus, but was confident that the country will remain strong, as it “holds one of the most comprehensive economic responses to this outbreak anywhere in the world.”

To tackle this disruption the government is providing £30 billion fiscal stimulus to support the NHS, people, jobs, welfare and the economy during this period of uncertainty. £7 billion from this investment will be allocated to businesses and families and £5 billion to the NHS.

It was also announced that a new Coronavirus Business Interruption Loan Scheme has been launched, that will see banks offer loans of up to £1.2 million to support SMEs.


Defence Spend

Although the defence sector did not take to the main stage during the Budget announcement, the Conservative Party pledged in its 2019 election manifesto to exceed the minimum 2% of GDP defence spend recommended for NATO members, with an increase of 0.5% above inflation for every year of the new parliament. The UK already spends 2% of its annual GDP on defence, the recommended minimum for NATO membership.

The Conservative party manifesto stated:

We will support the UKs world-class defence industry by investing in ambitious global programmes, including building the new Type 31 frigates in British shipyards such as Rosyth and a new generation of armoured vehicles, made in Britain.

Training, equipment, cyber security and aerospace are all areas in which the UK will invest in coming years. During the Budget, Mr Sunak committed a share of an extra £900 million investment for research to the space sector and a £10 million donation to Armed Forces Covenant.

It was also announced that businesses that employ veterans will be exempt from National Insurance contributions for their first year of work. This tax break will come into force in April 2021.


Delve deeper into MOD spend

The Ministry of Defence has placed SMEs at the heart of its defence procurement strategy and is committed to achieving 25% of spend going to SMEs directly and indirectly as part of the supply chain by 2022.

If this interests you, learn more about what the UK defence sector is spending on – and with whom.

Our Spend Analysis tool collates and publishes all UK defence sector and public sector spend data, which means you don’t need to wait for MOD spend reports.

DCI customers can gain access to the latest spend figures from DE&S and the Ministry of Defence as the contracts are awarded – ahead of industry competitors

Book a live demo with a member of our expert procurement team today to learn more about working within the UK defence marketplace.



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