Could the Strategic Review put Reeves back on the defensive?

What a difference a few weeks makes. Not so long ago, alarm at rising bond yields fed rumours that the Chancellor’s job was at risk. This week, however, Rachel Reeves is “making the weather” with a flurry of reforms to encourage greater investment by pension pots, expedite planning decisions and slash red tape.

It feels like the cadence and energy of announcements on the Government’s growth plans has increased. Reeves has called regulators into Downing Street to push them to reduce the burden on businesses, allowed positive noises on a third runway at Heathrow to grow louder, and will deliver a big speech on growth tomorrow. It speaks of a determined effort to be more front-footed on the economy.

All of this has been greeted with relative warmth, especially when compared to the reception  the Budget received. So far, so good, but debates over defence spending show that the Treasury still has some unpopular decisions to make.

Lord Robertson has delivered the first draft of the Strategic Defence Review (SDR), commissioned by the Government in July, to the Ministry of Defence. In places it will likely make difficult reading for the Government. One key issue is Britain’s vulnerability to ballistic missiles. Stories on this challenge are not new but have featured more prominently in the national press recently, and it would be an expensive problem to fix.

Speculation that the Government may push its target to spend 2.5% of GDP on defence beyond 2030 suggests that it is already difficult to find money for defence. Cutting spending on other, already stretched, departments to find extra funds would be politically unpalatable. Raising taxes further will not appeal either.

Doing neither also carries risks. The new US President has not been slow to throw his weight around, and punitive tariffs may snuff out the economic growth that Reeves is working so hard to rekindle. The UK does not want to be seen to be slacking on defence spending.

A lot can happen in a few weeks, and the SDR may mean that events move very quickly indeed. What should organisations be doing as the Government digests the results of the review?

They need to show that they are a part of the solution to the Government’s problems, and not just a cost. There is an opportunity for defence firms to position themselves as both a safe bet for Britain’s security, and a route to greater economic growth.

At Luther, we help clients reach, inform and engage with policymakers and stakeholders in the UK Government and Parliament as well as the devolved administrations. If your organisation is looking to shape the conversation on defence, get in touch with our team on: publicaffairs@luther.co.uk.