Monthly Archives: April 2023

What does the ongoing conflict in Ukraine mean for private equity investment in UK defence?

GK Senior Adviser Hugo Tuckett analyses the historical challenges for private equity investment into the defence sector, and takes a look at investment landscape in the years ahead. 

Defence has historically been a challenging area for private equity. The nature of contracts, cash flow models and high barriers to entry have often been cited as reasons for a lack of investment. This is alongside the perception that the industry is dominated by a relatively closed shop of actors.

However, has the Russian invasion of Ukraine changed the outlook for private equity in this space? Does an on-going war in the Europe open the door to investment in technologies with an offensive application?

ESG considerations have certainly softened. While private equity houses have traditionally steered away from investing in defence due to ethical considerations, public attitudes in the UK indicate a continued desire to provide military support to Ukraine. YouGov polling, conducted in February 2023 on the one-year anniversary of the Russian invasion, found that 65% of Britons supported sending additional weaponry and supplies to the country. There was also more support (45%) than opposition (25%) for cyber-attacks against Russian military capabilities.

Furthermore, the Government’s continued desire to financially back UK defence points to a healthy procurement environment in the years ahead. The Defence Secretary’s very public lobbying efforts to secure additional funding on top of the multi-year settlement agreed in 2020 have certainly been fruitful. At the recent Budget, the Chancellor, Jeremy Hunt, announced that the Government will commit an extra £11bn to the defence budget over the next five years and confirmed the decision to increase investment by £5bn over the next two.

Where, therefore, does private equity most stand to gain in the industry? KPMG analysis from 2021 highlights two possible areas private equity houses might look to explore. Firstly, supply chain consolidation. Liquidity issues amongst the supply base lends itself to lower-tier suppliers joining together to create economies of scale and gain access to more capital. Secondly, in innovation. For growth-orientated investors, cutting-edge assets that become available to the market via divestments from parent companies presents an opportunity for private equity houses to bring their expertise to assets that could go onto become extremely successful businesses.

While, of course, some parts of the defence industry remain outside the scope of private equity, shifting public attitudes to offensive military technology and growing Government financial backing certainly point to a welcoming investment landscape in the years ahead.

GK consultants are on hand to offer investment professionals our expertise helping to assess the UK’s political and regulatory outlook. Please get in touch at for more information.