The UK Government has pledged to boost spending with small and medium-sized enterprises (SMEs) by £2.5bn over the next three years, in a move aimed at strengthening national security and supporting economic growth — with Scottish firms set to benefit significantly.

The announcement came during a defence roundtable at Edinburgh’s Queen Elizabeth House, chaired by Defence Minister Lord Coaker following his visit to the Edinburgh Royal Military Tattoo. Representatives from eight innovative companies, spanning Stirling to Forfar, attended the meeting to share how their work is helping keep the UK safe.

The funding uplift, part of the government’s Plan for Change, reverses the decline in SME defence spending recorded before last year’s election. By 2028, a total of £7.5bn is expected to be spent with SMEs across the UK defence supply chain, both directly and indirectly.

Lord Coaker said the meeting showcased the vital role smaller firms play in the sector: “It was fantastic to meet many innovative Scottish companies who play a crucial role in strengthening our national security, boosting growth and providing jobs in their local communities,” he said. “Businesses in Scotland will be among those who can benefit from the £2.5bn increase in SME spending that we will deliver, helping drive defence as an engine for economic growth.”

Defence remains a major force in the Scottish economy, with the Ministry of Defence spending more than £2bn a year in the country — supporting nearly 12,000 industry jobs.

Scottish Secretary Ian Murray said the funding will deliver a “huge defence dividend” for Scotland. “The UK Government’s historic uplift in defence spending will help ensure Britain’s security, deter our adversaries and drive economic growth for years to come,” he said. “Our new Brand Scotland campaign will build on that success and help the sector export its world-class technology worldwide,” he said.

Programmes such as the multi-billion-pound redevelopment of His Majesty’s Naval Base Clyde are expected to create additional skilled jobs, including opportunities for SMEs, while tackling national skills shortages.

The Strategic Defence Review has emphasised the private sector’s role in unlocking innovation to give the UK and its allies a competitive advantage. Further details on government–industry collaboration will be set out in the forthcoming Defence Industrial Strategy.

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