UK Government Supercharges Nuclear Energy and Defence Funding

Spending Review 

In April 2025, Prime Minister Keir Starmer declared that "energy security is national security". This message was reinforced on 11 June 2025 when the UK Government published its Spending Review 2025 (“Spending Review”) and set out its £30 billion commitment to enhancing nuclear energy. 

Key points to note from the Spending Review are as follows: 

• £13.9 billion spending budget allocated to the Nuclear Decommissioning Authority to ensure that former nuclear sites and facilities remain safe and secure as they are decommissioned, and that nuclear waste is effectively managed.
• £14.2 billion announced in support of the Sizewell C nuclear power station. This initiative is part of the Government's broader strategy to make long-term decisions aimed at reducing reliance on costly and unstable fossil fuels that harm the environment.
• Following selection of Rolls-Royce SMR Limited by Great British Energy – Nuclear as the preferred bidder to develop small modular reactors (“SMRs”), the Government has committed £2.5 billion to support the UK’s SMR programme during the Spending Review period (subject to relevant approvals). 
• Over £2.5 billion invested in nuclear fusion, including support to progress for the UK’s world-leading programme to design and build a prototype energy plant (the “Spherical Tokamak for Energy Production” or “STEP” programme).
• The Government has also confirmed that it will be providing a pathway for privately-led advanced nuclear technologies. Further information is expected in due course following activities currently being carried out by Great British Energy – Nuclear, the National Wealth Fund, and Department for Energy Security and Net Zero to assess proposals within a new framework, as well as potential investment opportunities and revenue support for viable projects.

The Spending Review demonstrates the Government’s ambitions to firmly position the UK as a ‘clean energy superpower’ by implementing consistent long-term investment in nuclear power and turbocharging new innovations in the industry. 

The Government’s investment in nuclear energy should be considered within the wider context of growing global demand for energy security and the acceleration of new technologies. On 11 June 2025, the World Bank announced that it will be ending its decade-long ban on financing nuclear power. This decision will reverse a 2013 policy that prohibited loans for nuclear projects and enable developing countries to access nuclear energy as an alternative to fossil fuels.

Defence Spending

In addition to the £30 billion allocated to support nuclear energy in the Spending Review, on 2 June 2025 the Government published the Strategic Defence Review 2025 (“Strategic Defence Review”) which contains indications of defence investment in key areas. This includes a pledge to invest £15 billion in the sovereign warhead programme during this Parliament and desire to grow the UK’s nuclear-powered attack submarine fleet to up to 12 through the AUKUS programme.

The Strategic Defence Review follows the Government’s announcement in February 2025 to increase NATO qualifying defence spending to 2.5% of Gross Domestic Product (“GDP”) by 2027, with an ambition to reach 3% in the next Parliament when fiscal and economic conditions allow. The Government’s commitment to raising defence spending has been followed by a declaration from NATO leaders to invest 5% of GDP annually on core defence requirements as well as defence and security-related spending by 2035 (announced on 25 June 2025). 

Further detail on how the Government aims to deliver its defence funding ambitions will be published in the highly anticipated Defence Investment Plan which is expected later this year. 

The UK’s Modern Industrial Strategy

To round off a month of long awaited and highly anticipated announcements, the UK Government published The UK's Modern Industrial Strategy (“Industrial Strategy”) on 23 June 2025. 

The Industrial Strategy reaffirms the UK’s positioning as the world’s first civil nuclear nation with significant defence capabilities. It emphasises the importance of enhancing both civil and defence nuclear capabilities in the UK, which will drive economic growth and promote the expansion of nuclear energy. 

In addition to the major investments announced as part of the Spending Review, the Industrial Strategy confirms the Government’s support of strategic long-term R&D capabilities by committing to invest in work class laboratories such as AWE Nuclear Security Technologies. The Government aims to align civil and defence nuclear sectors, support decommissioning and waste management, and develop a High Assay Low Enriched Uranium (“HALEU”) fuel supply chain, ensuring energy security and global leadership in nuclear technology.

Please contact a member of our sector leading nuclear or defence teams if you would like to discuss any aspect of this article or any legal or commercial issues. 

This article was written by Laura Callard and Jade Gillett