Category Archives: Manufacturing

Helicopter over the dessert

Politics of Defence

The UK Government has today published its long-awaited Defence Investment Plan (DIP).

Due back in Autumn 2025, the plan aims to fund Britain’s Armed Forces into the next decade. In one of his final acts as Prime Minister, Sir Keir Starmer today announced an additional £15bn in funding for defence over four-years with money taken from other departments to pay for it. Nonetheless, the government has faced criticism from across Westminster on the funding allocation and the extent to which the DIP meets the challenges the country faces today and into the near future.

For the Prime Minister, this has come at a huge personal political cost. Lord Robertson, the highly respected lead author of the UK’s first independent Strategic Defence Review (SDR), published in June 2025, gave a carefully constructed speech in April directly criticising Sir Keir and Chancellor Rachel Reeves in what he described as a ‘corrosive complacency [today] in Britain’s political leadership’. More recently, two defence ministers, including the Secretary of State John Healey, resigned over the Prime Minister’s political weakness when faced with commitments to fund defence.

While the government has accepted the SDR’s 62 recommendations, the DIP today makes clear and sensible allocations in areas set out below and supportive of last year’s SDR. Yet at its heart, the monies still fail to add up to fund UK defence with many across defence industry and the military having already spoken to this fundamental point.

The plan itself focuses on cheaper, uncrewed autonomy, space, land lethality, cyber and electromagnetics in addition to £11bn to replenish the weapons and munitions sent to Ukraine and £63bn for the nuclear deterrent – it alone is some 20 per cent of the overall budget.

The 81-page plan delivered to Parliament by the new Defence Secretary Dan Jarvis, sets the course for defence spend of only 2.7% of GDP by 2030. Tan Dhesi MP, Chair of the Commons Defence Select Committee, said the government has not provided a ‘clear pathway’ to spending the committed three per cent of GDP on defence.

There remain unanswered questions over the allocation of funds for capital spend in an environment of large personnel expense and general fiscal realism. While the SDR set an ambition within tight spending envelopes, the DIP was meant to be a serious credibility test of government.

In a wider update to the Commons, Dan Jarvis did not rule out the UK joining a defence investment bank, an idea championed by former Bank of England Governor, Mark Carney, the now Prime Minister of Canada. This is something the Treasury has resisted. Of interest, former Health Secretary Wes Streeting asked Jarvis if the government would reconsider joining in the Commons earlier today.

Beyond equipment, the government has committed to invest £70m to support veterans through the Office for Veterans Affairs, including £12m investment in a new fund for reducing veteran homelessness.

Ultimately, all government policy, including defence, is Treasury-driven and what the PM thinks matters most; this most recent review and debate over funding secured the fate of Prime Minister Starmer. In a matter of weeks, the UK government will be under new leadership, faced with the very real and pressing challenges of national security. With visibility of government priorities and funding allocated, now the defence industry small and large can answer the government’s call and GK Strategy is ready to help with engagement, both in procurement and senior relationships in DE&S, Main Building and across Whitehall.

Please email Senior Partner and defence and security lead Scott Dodsworth to learn more. scott@gkstrategy.com

SD. Tuesday 30 June 2026

From Policy to Production: The EU’s Industrial Accelerator Act

The journey was long and the debates fierce. While the European Commission had initially scheduled its official presentation for November 25, 2025, it was only on March 4, 2026, that the Industrial Accelerator Act (IAA) was finally unveiled.

Justified by the imperative of economic security, this initiative marks a major turning point in the Union’s economic strategy. It aims to strengthen supply chain resilience while safeguarding the continent’s industrial capacity.

First mentioned in the Clean Industrial Deal under the name Industrial Decarbonisation Accelerator Act, the text was intended to stimulate demand for clean European products by introducing sustainability, resilience, and European preference criteria into both public and private tenders.

Although the final regulation has dropped the “decarbonisation” label, it retains its core essence. The Commission has set an ambitious sovereignty target: to increase the share of manufacturing industry to 20% of European GDP by 2035.

However, this text is the result of a laborious compromise. In the face of reluctance from certain Member States and internal tensions between several Directorates-General, some flagship measures had to be substantially reworked before reaching this final version.

Streamlining Industrial Procedures

Several measures within the IAA aim to facilitate and strengthen the deployment of industrial manufacturing capacities.

Facilitating Permit-Granting Procedures

This applies specifically to permit-granting procedures for industrial manufacturing and decarbonisation projects. Member States are required to establish a single application procedure, grouping all necessary permits within one application, accessible through a single access point.

A designated competent authority, responsible for coordinating the process, has 45 days to either acknowledge the application as complete or request any missing information. At the same time, all energy-intensive industry decarbonisation projects benefit from preferential treatment: they must be able to rely on the accelerated procedures provided for by the NZIA (Net-Zero Industry Act), as well as the environmental assessment streamlining measures proposed by the Commission in February.

Creation of Industrial Manufacturing Acceleration Areas

The regulation also mandates each Member State to designate industrial manufacturing acceleration areas on its territory.

Designed as true clusters of “industrial symbiosis,” these areas must provide a reinforced competitiveness framework. This includes the streamlining of procedures and the pooling of infrastructure, as well as access to financing, support for research and innovation, and the provision of a skilled workforce.

These areas are intended to prioritize manufacturing sites for sectors identified as strategic, namely:

  • Certain energy-intensive industries: manufacture of paper, coke and refined petroleum products, chemicals, rubber and plastic products, other non-metallic minerals, and basic metals;
  • The automotive industry: manufacture of motor vehicles, trailers, and semi-trailers;
  • Net-zero technologies identified in the NZIA (notably batteries, solar PV, and hydrogen).

Developing Demand for Clean European Products

One of the primary objectives of the IAA is to foster the emergence of lead markets for certain products in strategic sectors by imposing European origin requirements, low-carbon intensity criteria, or a combination of both.

An Outward-Looking European Preference

Arguably the most sensitive point of the text, the Commission’s proposal outlines, for the first time, the contours of a European preference (outside the field of defense). The IAA thus conditions access to certain public procurement contracts or public support schemes on compliance with a European origin criterion for the products supplied.

Regarding industrial production, only a few specific products are targeted:

  • Concrete and mortar, as well as any product whose performance depends mainly on these materials (including clinker and cement), intended for buildings and infrastructure. The required share of European origin is set at 5%.
  • Aluminium, and products whose performance depends mainly on it, used in buildings, infrastructure, and the automotive sector. The European origin threshold here is 25%.

For the automotive sector, the origin criterion applies only to pure electric vehicles (PEV), off-vehicle charging hybrid electric vehicles (OVC-HEV), and fuel-cell electric vehicles (FCEV) that are purchased, leased, rented or hire-purchased.

To satisfy this criterion, several conditions are set, such as final assembly within the Union, the integration of at least three main specific battery components originating in the EU, or a ratio where the total ex-works price of vehicle components (excluding the battery) originating in the Union represents at least 70% of the total ex-works price of all components. Specific conditions are also provided for small electric vehicles in the new M1E category, introduced during the automotive package of December 2025.

However, far from Chinese-style protectionism or the “Buy American Act,” this European version represents a middle ground between the need for protection expressed by part of European industry and the commitment of certain Member States to international trade.

This balance relies on several limitations, whether in the scope of public procurement and public support schemes affected by this European preference (see Articles 11 and 12), or in the actual location of the production country.

Indeed, Articles 8 and 9 specify that content originating from partner third countries (signatories of a free trade or customs union agreement, or parties to the WTO Agreement on Government Procurement) is deemed to be of Union origin.

Introduction of Low-Carbon Content Requirements

The IAA also imposes carbon emission requirements for certain products supplied in the context of public procurement or projects benefiting from public support. These requirements target concrete, mortar, and aluminium under the same conditions as the European origin criterion, but also include steel. Indeed, the proposed regulation stipulates that at least 25% of steel (as well as any product whose performance depends mainly on this material) intended for buildings, infrastructure, and motor vehicles, must meet low-carbon criteria.

The framework for assessing this low-carbon character varies depending on the nature of the products:

  • For construction products: it will be determined based on harmonised technical specifications or European Technical Assessments (ETA) adopted under the Construction Products Regulation (CPR).
  • For other products: the assessment will be based on the ecodesign requirements set by the ESPR (Ecodesign for Sustainable Products Regulation).

Enhanced Screening of Foreign Direct Investment

While remaining open to Foreign Direct Investment (FDI), the EU is establishing – via the IAA – a stricter framework for large-scale projects in strategic sectors (batteries, electric vehicles, photovoltaics, and critical raw materials).

From now on, any investment exceeding €100 million in a sector where a single third country controls more than 40% of global manufacturing capacity is subject to explicit approval. This decision falls either under a competent national authority, which each Member State is required to designate, or directly under the European Commission.

To be granted the authorization, the investment must satisfy at least four of the six compliance criteria established by the regulation. These criteria concern:

  • The degree of control exercised by the foreign investor over the European entity;
  • Guarantees for the protection of intellectual property;
  • The share of research and development expenditure localized in Europe;
  • The proportion of the workforce employed within the Union;
  • The level of sourcing of inputs of European origin.

If you would like to discuss the impact of the EU’s Industrial Accelerator Act in more detail, please do get in touch with the GK team or our European partner, Euros / Agency.