“People need to be reminded more often than they need to be instructed”
Samuel Johnson
As we approach the season of goodwill to all, Commentary cannot but help reflect on a theme that has developed across the national and international conversation lately regarding our defence and security. The message from those in the defence and security world is very clear. But are our political leaders listening?
CDS annual lecture at RUSI
This was the first CDS lecture by the new incumbent, Air Chief Marshal Sir Richard Knighton. Speaking on Monday 15th December he said…. “For three decades, many did not have to think about the Armed Forces. Peace was stable. Conflict was distant. But that is no longer true. I will argue that the situation is more dangerous than I have known during my career and the price of peace is rising. Our response needs to go beyond simply strengthening our armed forces. It needs a whole of nation response that builds our defence industrial capacity, grows the skills we need, harnesses the power of the institutions we will need in wartime and ensures and increases the resilience of society and the infrastructure that supports it.”
NATO Secretary General speech
On the 11th December the Secretary General of NATO gave a speech in Berlin: “When I became NATO Secretary General last year, I warned that what is happening in Ukraine could happen to Allied countries too and that we had to shift to a wartime mindset. This year, we took the big decisions to make NATO stronger. At the Summit in The Hague, Allies agreed to invest 5% of GDP annually in defence by 2035, we agreed to increase defence production across the Alliance, and we agreed to continue our support to Ukraine. But this is not the time for self-congratulation, I fear that too many are quietly complacent, and too many don’t feel the urgency, too many believe that time is on our side. It is not, the time for action is now. Allied defence spending and production must rise rapidly, our armed forces must have what they need to keep us safe, and Ukraine must have what it needs to defend itself – now. Our governments, parliaments, and our citizens have to be in this together. So that we can continue to protect peace, freedom, and prosperity, our open societies, our free elections, and a free press.”
US national Security Strategy
On the 5th December the US government published its latest Security Strategy. The big surprise was the degree to which the senior leaders in the US government now dismiss Europe as an ally. The purpose of this may be to encourage European countries (including the UK) to increase their efforts to fend for themselves in terms of their own defence. This chimes with the remarks by the Sec Gen of NATO, even if it is a bit more crude in the way it is presented.
The challenge for the government will be how it can persuade its US partners, in this more transactional era, that the UK is a credible and reliable partner. From our nuclear deterrent to the five eyes partnership, the US possesses capabilities that will be difficult to replace should this relationship go wrong. Surely one way to do so is to get our own house in order vis a vis our capabilities. The Ajax dilemma is the latest chapter in a sorry saga. The MOD must grip this; our national security is at risk if it is not fixed. The new National Armaments Director must make this job number one on his list of urgent actions.
Defence Investment Plan
At the time of writing there is no sign of the long expected DIP. Sources suggest that it may appear in mid – January, we shall see. In which case the first Commentary of 2026 will examine it and its implications for the defence and aerospace sector.
EU Defence Industry Programme
On the 8th December the European Council formally adopted the European Defence Industry Programme (EDIP), an instrument designed to boost the EU’s defence readiness by strengthening the competitiveness and responsiveness of the European Defence Technology Industrial Base (EDTIB). The adoption marks the final step in the legislative procedure and will enable the programme’s timely implementation.
EDIP is described as the cornerstone of the EU’s renewed commitment to bolster its defence readiness. It will strengthen the ability of EU Member States to face current and future threats, enhance the competitiveness of the EDTIB, and ensure the timely availability and supply of defence products across the Union. The programme provides €1.5 billion in grants for the period 2025-2027 (the current EU budget runs until 2027). Out of this amount, €300 million are earmarked for a dedicated Ukraine Support Instrument.
EDIP also allows for potential further budget reinforcements in the future, such as by voluntary financial contributions by member states or third parties, [such as the UK possibly]. Under the programme, the EU will fund:
- common procurement actions carried out by at least three countries (of which at least two must be member states), including for the establishment and maintenance of defence industrial readiness pools
- industrial reinforcement actions, consisting of activities to ramp-up the production capacity of critical defence products
- the launch of the European Defence Projects of Common Interest, collaborative industrial projects designed to contribute to the development of member states’ military capabilities critical for the security and defence interests of the Union
- supporting actions, including activities to increase interoperability and interchangeability, and activities to facilitate access to the defence market for SMEs, mid-caps and start-ups
To safeguard and strengthen the EU defence industry, whilst still maintaining cooperation with likeminded international partners, the regulation adopted contains a clause by which components originating outside the EU and associated countries (EEA states), as well as Ukraine for the Ukraine Support Instrument, should not exceed 35% of total component costs of the end product. No components may be sourced from non-associated countries that conflict with the EU’s or member states’ security and defence interests. The regulation will be signed on 17 December 2025 and enter into force on the day following that of its publication in the Official Journal of the European Union.
Budget
There was little expectation of any particularly defence related news from the Budget. And we were not disappointed!
Politico – J P Morgan
A little noted news story was picked up by Politico – at the Raegan National Defence Forum, held in Simi valley California over the weekend of 6th December; ’JP Morgan Chase CEO Jamie Dimon announced the establishment of a $ 1.5 trillion — “Security and Resiliency Initiative,” including up to $10 billion in direct investments spanning defence, energy, advanced manufacturing and cutting-edge tech. It marks one of the greatest efforts ever by a major financial institution to take part in U.S. defence production.’
Might we expect to see one of the City’s big banks undertaking a similar initiative?
LDC Investment Forum, getting to 5%
Held in the City of London, and chaired by Iain Martin, this event has become a regular feature on the defence scene. It is not the usual suspects explaining what should happen, but an in depth look at how things should happen. The key driver is to ensure that the investment community understands both the necessity and the opportunities arising from the need to invest in the defence sector. There are (still) some fund managers who adhere to the idea that an ESG basis for investment is the only measure that is relevant, and this does not include the defence sector.
NATO members have committed to increasing spending on defence, aiming for 3.5% of GDP by 2035 plus 1.5% on national security and resilience. As a result, in a report authored by Olivier Brochet and Joe Orchard, Rothschild Redburn estimates that European based revenues in the defence sector could increase by 10.5 – 11.5% annually over the next 10 years. The London based IISS estimates that most spending has been in the Air Defence and Land armaments sectors, capturing 47% of the orders received since the start of the Ukraine conflict.
Readers of Commentary will be familiar with the oft repeated mantra, by now, that if the UK government wants to achieve a faster increase in defence funding, it should be engaging with the private sector to leverage some funds into the defence budget. It will also help to drive the innovation needed to remain abreast of the rapidly evolving developments in defence tech.
The price of war
In a similar vein The Price of War Symposium – held at Church House Westminster is in its 4th iteration. Chaired and founded by Susan E. Walton, the symposium brings together global experts to address geopolitical and geoeconomic risks across the themes of Economic Security and Freedom, with specific focus upon Tripartite Resilience: National Security, Critical Infrastructure and Financial Systems. The 4th edition of the event continued critical discussions on the key drivers behind investing in a time of conflict, integrating leading investors and asset allocators, corporates, economists, policy makers, diplomats and academics.
There is no doubt that the wider public needs to understand the times we are living in, not so that they are scared, but that they are well informed. Our open societies are under threat because autocrats detect weakness. A well informed discussion, such as occurred at this event, needs a more widespread audience.
Comment
As the new head of MI6 said in her inaugural speech on 15th December, “we are now operating in a space between peace and war.”
Over the festive break we will no doubt have the opportunity to discuss the state of the world and the outlook for 2026 with colleagues, friends and family. We should not shy away from the fact that the times we live in are different from what we have become accustomed to. The post 1989 era has been described as a ‘holiday from history’ so we would do well to remind ourselves and others that in the end autocracies and empires come to an end. Equally the lessons of appeasement should not be lost on us. The cost of deterrence is much smaller than the cost of reconstruction.
In 2026 Commentary will endeavour to continue to inform the debate about the role of our aerospace and defence sector as a guarantor of our freedom. It remains the duty of our political leaders to use the resources at their disposal to ensure that the UK is a credible and reliable partner for our friends and allies around the world.
As James Freeman Clark an American theologian said: “the difference between a politician and a statesman is that the politician is thinking about the next election, and the statesman is thinking about the next generation.”
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Nick Watts
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