Segmentation Shake Up: What UK Defence Suppliers Need to Know Now

The UK defence sector is entering a pivotal phase, with the forthcoming Defence Investment Plan (“DIP”) anticipated to bring much-needed guidance for industry. While the timeline for its release remains in flux, particularly following on from recent political events, this period of transition is enabling suppliers and stakeholders to reflect on current processes and prepare for new opportunities arising from evolving government direction.

The DIP, intended to set out a ten‑year costed roadmap for major capabilities, has seen its timeline extended as the government works to ensure its accuracy, relevance and adequacy. In the meantime, however, the government has now launched its new “segmented approach” to defence procurement.

The change – one of the Strategic Defence Review recommendations accepted by the government and originally announced in the 2025 Spring Statement – carves defence acquisition into three tiers, each designed to accelerate delivery by matching procurement pathways to the nature of the capability being bought:

1. Major platforms (e.g., ships, tanks, aircraft) – contracting within two years;

2. Pace Setting Development & Modular Upgrades (e.g., communications, sensors, weapons systems) – contracting within one year; and

3. Rapid Commercial Exploitation (e.g., software, AI, off-shelf drones) – contracting within three months and cyclical.

The reform aims to address long‑standing problems: over‑complex requirements, slow contracting cycles, and insufficient visibility for industry. Crucially, the segmented system is intended to shorten timelines, particularly for fast‑moving technologies such as drones, battlefield digitalisation and tactical systems where rapid fielding is essential and delays are likely to undermine operational advantage.

For industry, the transition offers both opportunity and challenge. While the segmented approach promises greater agility and more proportionate processes, it also raises expectations around compliance, adaptability, and commercial responsiveness. Defence contractors should prepare for shorter bid cycles, leaner requirement sets, and more scrutiny on value and delivery risk. There may also be an increase in short-term bridging arrangements and greater negotiation around risk allocation.

Potential impact on SMEs

For SMEs, segmentation offers both promise and potential pressure. Shorter contracting cycles and lighter requirements could reduce barriers to entry and allow smaller firms to compete for rapid‑tier projects where agility is an advantage. 

However, SMEs will need to respond to the demands of faster bidding timeframes, increased documentary discipline, and more stringent compliance expectations from contracting authorities. 

Some of the ways SMEs could position themselves to mitigate these potential challenges are:

• Collaborating with larger defence contractors, forming consortia or partnerships to share compliance responsibilities and reduce individual burdens.
• Participating in pre-market engagement events and briefings. These can provide a good opportunity to ask about upcoming procurement cycles and requirements.
• If resources allow and subject to meeting applicable security requirements, investing in digital bid management tools, which may help streamline documentation and accelerate response times during procurements. Alternatively, consider outsourcing compliance and document preparation to specialised consultancies to enable the core team to focus on the technical solutions and delivery proposals.

Potential risks of segmented procurement

While segmentation aims to inject speed, it also introduces legal and commercial risks. Faster pathways may compress diligence, raising the chance of premature down‑selection, inconsistent requirement‑setting, under-scoped contracts, cost increase and, ultimately, capability shortfalls. 

Final thoughts

Until the DIP is formally published, the segmentation approach is likely to operate without a stable strategic baseline. So, in essence, may offer speed and agility but not certainty as to the longer term investment priorities for UK defence and security. 

However, in the meantime, industry will need to proactively prepare for more flexible contracts, reduced procurement timescales, and renewed focus on appropriate risk allocation.

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 Laura Tudor