Britain’s Prime Minister Keir Starmer (C), Britain’s Defence Secretary John Healey (2nd R) and managing director of BAE Systems’ naval ships business Simon Lister (R) visit the BAE Systems’Govan facility, in Glasgow, on June 2, 2025. Britain announced it will build 12 new attack submarines as it unveiled a major defense review to deal with “growing” Russian aggression and the changing nature of warfare.
Andy Buchanan | Afp | Getty Images
British Prime Minister Keir Starmer announced an overhaul of the U.K.’s defense spending on Monday, warning Britain it faces “war in Europe.”
“We are moving to war-fighting readiness,” Starmer said as he unveiled the government’s much-anticipated “strategic defence review” at a time of heightened vulnerability on the continent, with the U.K. saying the threat and instability posed by Russia and other adversaries “cannot be ignored.”
The U.K.’s defense plans include building 12 new nuclear-powered attack submarines, a boost to the manufacturing of drone, missiles and munitions, as well as bolstering of cyber warfare capabilities.
Starmer said the U.K.’s defense spending would rise to 2.5% of gross domestic product (GDP) by 2027 and set out the “ambition” to increase that to 3% of GDP in the next Parliament — that is, by 2034 — “when economic and fiscal conditionals allow.” NATO estimates suggest the U.K.’s defense expenditure as a share of GDP was 2.33% in 2024, above the alliance’s 2% target set out in 2014.
One of the U.K.’s priorities was to strengthen the NATO coalition, the prime minister said, adding that Britain’s defense policy will “always be NATO first.”
NATO wants its 32 members to commit to spending 5% of GDP on defense and security-related infrastructure by 2032 and is set to push for that target when it next meets on June 24-25.
Analysts and economists argue that, while the U.K.’s defense plans are welcome news in uncertain times, they could ultimately prove to be too little, too late — and that they might be potentially difficult to deliver, given fiscal constraints in the U.K.
Too little, too late?
The amount that NATO members spend on defense is a persistent bugbear for the alliance — and for U.S. President Donald Trump — with some members far exceeding the 2% GDP target, and others repeatedly falling short of that amount in recent years.
Defense expenditure has sharply picked up among NATO members since Trump was last in power, however. In 2018, at the height of the White House leader’s irritation with the military bloc, only six member states met the 2% target, including the U.S.. That compares with 23 members in 2024, according to NATO data.
While some greatly surpassed that threshold — such as Poland, Estonia, the U.S., Latvia and Greece — major economic powers including Canada, Spain and Italy are among the laggards below the contribution threshold.
No NATO member has yet reached the 5% spending objective suggested by Trump or NATO’s Secretary General Mark Rutte.
Some NATO allies have already given a withering response to the U.K.’s 2.5% defense spending target with the defense minister of Lithuania — which spent an estimated 2.8% of GDP on defense in 2024 — reportedly telling the BBC that figure was “old news.”
Starmer has also refused to commit to an explicit timeline for when the U.K. might increase its defense spending to 3% in the next parliament (2029-2034), telling the BBC earlier on Monday that he is not “going to make a commitment as to the precise date, until I couldn’t be sure precisely where the money is coming from, how we can make good on that commitment.”
The European aerospace and defense sector welcomed the spending plans, with the Stoxx 600 aerospace and defense index up 0.45% on Monday.
But although “the spending plan is unequivocally positive for the sector … the impact will be gradual and backloaded,” Loredana Muharremi, equity analyst at Morningstar, said Monday.
Britain’s Prime Minister Keir Starmer delivers a speech during a visit to the BAE Systems’Govan facility, in Glasgow, on June 2, 2025. Britain announced it will build 12 new attack submarines as it was set to unveil on June 2, 2025 a major defence review to deal with “growing” Russian aggression and the changing nature of warfare. (Photo by ANDY BUCHANAN / POOL / AFP) (Photo by ANDY BUCHANAN/POOL/AFP via Getty Images)
Andy Buchanan | Afp | Getty Images
She noted that while the U.K.’s defense plans “support nuclear warhead modernisation, expansion of the submarine fleet under the AUKUS program, scaled-up munitions production, and enhanced investment in cyber and long-range strike capabilities,” they could still fall short of the broader defense ambitions of Trump and NATO.
“While the U.K. government believes these spending targets are sufficient to meet its national security objectives, they may still fall short of growing expectations from NATO and the U.S., with the Trump administration urging a faster path to 3% by 2029.”
Defense experts argue, meanwhile, that throwing more money at defense won’t be transformational in and of itself.
“The spending target of 2.5% of GDP is not so significant an increase as to be genuinely ‘transformational’ – at least, not given the current state of the Armed Forces,” Matthew Savill, director of Military Sciences at the Royal United Services Institute (RUSI) said in analysis ahead of the review.
“To be transformational, it will need to cut and significantly reshape the Armed Forces by taking risk in some areas to transform others,” he noted.
The boost of several billion pounds a year should probably first be used to fill gaps in ammunition and other weapons stockpiles, infrastructure and logistics, and in support to personnel conditions, pay and recruitment, he said.
But to make “radical, rather than incremental additions to military capability” this will “require some big choices on early retirement of capabilities or reductions in numbers,” he said.
“Defence has been here before in terms of the promise of new capabilities being presaged by the early loss of others due to budget pressure.”
Fiscal constraints
Although the U.K. aims to have an integral role in anchoring European defense and security, “such a role won’t be costless,” Deutsche Bank’s Senior Economist Sanjay Raja and Strategist Shreyas Gopal said Monday.
“Political and economic trade-offs will be large,” they said in a research note, cautioning that “there isn’t much fiscal space for additional defence spending.”
Fiscal constraints could limit upgrades to the U.K.’s defense arsenal against the government’s spending framework.
Britain’s Prime Minister Keir Starmer meets with Britain’s Chancellor of the Exchequer Rachel Reeves, days before the announcement on the first budget of the new Labour government, at Downing Street on October 28, 2024 in London, England. Starmer and Reeves are meeting ahead of the Budget on Wednesday.
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“As the U.K. steps up its defence support – potentially participating in EU initiatives and scaling up its own capabilities – the Chancellor faces a tightrope walk: sustaining credibility with financial markets, meeting increasing NATO and EU expectations on defence spending, and addressing public demands for investment in health, education, and infrastructure (among other things),” they said.
The coming years will test the government’s ability to reconcile its strategic ambitions with fiscal discipline, the analysts said, noting: “We see increasing risk that the U.K. Government will need to bring forward its ambition to raise defence spending to 3% before the end of the parliamentary period.”
