The SDR 2025: Top 5 Takeaways for Customers and Suppliers in Defence

The long awaited and highly anticipated Strategic Defence Review 2025 (SDR) was published last week, setting out a transformative blueprint for UK defence in an increasingly contested world. 

The SDR’s vision is for UK Defence, by 2035, to become "a leading tech-enabled defence power, with an Integrated Force that deters, fights, and wins through constant innovation at wartime pace". This overarching vision is supported by 5 key ambitions along with 62 recommendations, all of which the Government has confirmed that it intends to implement.

In this blog post, we break down five key points from the SDR that you should be aware of if you are involved in UK defence contracting and deal-making, and what this could mean for you and your organisation.

1. Capability Development

The SDR confirms the UK’s strategic commitment to developing capability to support “warfighting readiness” across all domains, including new and continued investments in capability in Land, Maritime, Air, Space and Cyber, along with the creation of a new Cyber EM Command by the end of this year to cohere military action across cyberspace and the electromagnetic spectrum. 

There is also a reaffirmed commitment to the government’s major strategic programmes, including the design and development of next generation fast jets through the Global Combat Air Programme, production of 4 Dreadnought-class submarines, and delivery of “up to” 12 SSN-AUKUS class submarines, recognising that these flagship programmes are central to achieving the SDR vision.

2. Funding and Investment

The SDR is released in the context of “the largest sustained increase to defence spending since the end of the Cold War”, with spending set to rise to 2.5% of GDP by 2027, and to 3% in the next Parliament “when fiscal and economic conditions allow”. Whilst the SDR gives some broad indications of funding allocations in key areas, we can expect more detail on the specifics of the funding available and how it will be allocated in a new Defence Investment Plan, which is not due to be completed until the autumn. The new plan will replace the existing Defence Equipment Plan and will be “deliverable and affordable”, covering infrastructure investments alongside capability development.

3. Procurement Reform and Industrial Support

The SDR places acquisition reform front and centre as traditional programmes are acknowledged to be too slow and risk-averse for the modern threat environment. It reiterates support for the segmented procurement approach previously outlined in the Spring budget (see our blog post here) which aims to drastically shorten procurement timescales, with an ambition for this new methodology to be implemented by March 2026. 

Alongside this, a package of support will be developed for industrial partners, with the aim of removing barriers to collaboration and driving better, more cost-effective results. This will include:

• reducing the burden of DefStans and DEFCONs; 
• working across Government to amend the Single Source Contract Regulations; 
• reforming regulations, intellectual property handling, and security clearance requirements; and 
• providing access to intelligence, data, and test and evaluation sites.

4. Innovation, Emerging Tech and AI 

The SDR reinforces the commitment to embed emerging technologies and AI into the heart of UK defence capability. From autonomous systems to AI-driven logistics, the objective is for technology to no longer be seen as a supporting enabler, but a core strategic asset.

As well as new capability development focusing on leveraging digital innovation, practical measures will be taken to support the agenda including the establishment of a new Defence Uncrewed Systems Centre by February 2026, and a protected Defence AI Investment Fund to accelerate the adoption of AI in defence.

5. International Partnerships and Opportunities

The SDR also sets out the government’s objective to forge and maintain international partnerships in line with its “NATO First” policy. It recommends that the government develop a multilateral capability plan with NATO Allies to identify capabilities for joint procurement, application of common standards, and improved interoperability.

It also recommends a number of measures aimed at boosting defence export opportunities for UK industry, including:

• designing more streamlined export processes, with responsibility for UK Defence and Security Exports to be transferred from the Department for Business and Trade to the MOD; and
• undertaking a review of export licensing policies to improve prioritisation and provide clarity to industry and international partners.

What does this mean for suppliers and customers?

The SDR sets out a comprehensive set of ambitions and plans, which will go some way to providing comfort to industry of the government’s commitment to long term investment, and start to resolve some of the uncertainty we have been seeing in the market, although clearly there is still a long path ahead to implementation.

Key implications for customers and suppliers in defence over the coming months and years are likely to include:

• Increased certainty for UK industry, allowing industry to continue to plan and invest, creating opportunities throughout the defence supply chain.
• Opportunities for new market entrants, with the measures introduced by the SDR demonstrating a very clear drive to open the door for SMEs and non-traditional defence companies (including start-ups and dual-use tech firms) to enter the market and take advantage of defence opportunities.
• Changes to delivery models, with traditional primes increasingly needing to look to industry partnerships to ensure that they can deliver the tech-focused ambitions of the SDR.
• Regulatory and policy reform, which will be needed to align acquisition processes and regulatory requirements with the SDR ambitions. Suppliers and customers will need to keep on top of these changes as they develop. 
• Changes to contracting frameworks are also likely to follow, with the SDR signposting a move away from defence specific terms in certain cases, with standard defence conditions being overhauled where they continue to be used. Contracting approaches will also need to provide for more flexibility to accommodate the government’s rapid procurement objectives, as well as adapting to keep up with new and evolving regulatory frameworks and risks around emerging tech and AI solutions. 

What’s Next?

This SDR is more than a strategic document - the objective is real, structural change to how defence capability is funded, acquired, and delivered. Over the coming weeks we will be exploring in more depth the impact this will have on customers and suppliers in a series of articles analysing the implications of the SDR across the key defence domains - Air, Land, Sea, Space, and Cyber - and examining the key themes that connect them all.

In the meantime, if you would like to discuss any aspect of this article or any other legal or commercial issues with our sector leading team of defence experts, please get in touch. 

This article was written by Lucy Owens and Will Flaim