The UK’s defence and national security sectors are set for expansion, with investment in European defence, security and resilience startups reaching an all-time high of $5.2 billion in 2024.
The figure, driven largely by venture capital, represents almost a fivefold increase in six years, according to a report from Investment advisory firm Heligan Group.
The surge has been fuelled by geopolitical tensions, mainly the Russia-Ukraine war, which has driven demand for advanced defence technologies. While investors have traditionally avoided “kinetic” assets such as weapons systems due to ESG concerns, the researchers highlighted a shift in sentiment. Capital is being directed towards dual-use technologies such as AI, cybersecurity, autonomous systems and quantum, which combine enterprise value with national security applications.
“There is a realignment of ethical and ESG lines,” stated the report. Many investors now see defence and security as essential to societal stability, especially against the backdrop of war in Eastern Europe. That change has unlocked a growing flow of capital into defence startups, scale-ups and proto-primes.
Between 2014 and 2024, the UK defence sector turnover rose by 64%. In 2024, the UK’s aerospace, defence, security and space industries together employed 443,000 people and generated more than £100 billion in revenues.
The UK and Germany have emerged as the leading destinations for defence-related venture capital, with the UK attracting the largest share since 2019. Germany overtook the UK in 2024, while France also saw strong inflows. At the policy level, Europe launched the Nato Innovation Fund in 2023 — a €1 billion multinational venture vehicle backed by 24 Nato allies — while the EU’s European Defence Fund is co-financing €8 billion of R&D projects between 2021 and 2027.
Post-Brexit, the UK has continued to pursue innovation independently through the National Security Strategic Investment Fund and the Defence and Security Accelerator. Innovation is now centrally coordinated by the newly established UK Defence Innovation organisation.
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Matt Croker, partner, corporate finance at Heligan Group, commented: “Public-private collaborations fundamentally reduce investment risk for private investors and provide long-term growth prospects, while fostering innovation and building the critical links and understanding between those with the need and those with the solutions. A new UK-EU post-Brexit agreement also paves the way for UK-based firms’ access to the EU’s new Security Action for Europe – a €150 billion fund providing loans for defence projects. Subsequently, I believe that the long-term stability and resilience of investments in defence are improved due to a sector strongly influenced by geopolitical necessity and one that is financially backed with governmental support.
Private equity (PE) and corporate investors are also playing a significant role. Large defence contractors are reinvesting profits into R&D, and we are seeing more acquisition plays of innovative firms, such as the 2024 acquisition of SixWorksby IBM for $150 million from Chiltern Capital, while PE firms have made headline acquisitions of UK defence companies.”
Croker said that rising geopolitical risks are prompting institutional investors to rethink long-standing restrictions around defence allocations. “With heightened threat levels, investors are starting to recognise defence as not only critical, but also an untapped and potentially lucrative part of the investment landscape.”
The UK government has pledged to raise defence spending to 2.5% of GDP by 2027, while the Ministry of Defence plans to allocate at least 7% of its budget to R&D by 2030 — nearly doubling annual defence science spending to about £4 billion.
According to the analysis, these moves reflect broad confidence in defence technology. Government commitments, Nato and EU programmes, and growing flows of private VC and PE capital are converging to accelerate innovation. The UK defence sector’s 31% turnover growth over the past decade underlines the pace of this transformation.
