Britain’s Defence Strategy: from diagnosis to delivery
Our analysis of the UK's Ministry of Defence Strategic Defence Review 2025.
Today, Britain's newly published Strategic Defence Review (SDR) makes one thing clear: the Ministry of Defence (MOD) understands where the world is headed. From uncrewed autonomy and digital targeting to perpetual munitions manufacturing and cyber-electronic warfare integration, the SDR offers the most ambitious defence strategy the UK has issued in decades. But as anyone in venture or technology knows, ambition is cheap. Execution is everything.
A call for urgency and innovation
At Air Street Capital, we were invited to make a submission to the SDR process last year. Our message was simple: the UK has no time to waste:
We urged the MOD to treat artificial intelligence not as a future curiosity but as an organising principle of modern warfare.
We argued that venture-backed dual-use companies must be brought into the fold on equal terms with traditional suppliers.
We advocated for systemic procurement reform to allow the UK to field capability at software speed.
Strategic signals of progress
To its credit, the SDR takes major steps in this direction. Most notably, it creates UK Defence Innovation (UKDI), a new centre of gravity for sourcing and deploying novel technologies, backed by a ring-fenced budget of at least £400 million and a mandate that 10% of the equipment budget be spent on emerging capabilities. The MOD also commits to establishing a Defence Investors’ Advisory Group, echoing our recommendation that venture capital not be lumped in with generic SME engagement. These reforms signal a new willingness to treat the innovation economy not as a sideshow but as a strategic partner.
The review is equally clear-eyed on force design. Long-range, attritable autonomous systems—such as land-based Recce-Strike swarms and hybrid carrier drone wings—are no longer edge-cases, they’re core architecture. By 2027, the MOD aims to field a digital targeting web backed by a Secret-level cloud network and a new Digital Warfighter cadre. These shifts demand exactly the kind of layered autonomy stack that companies like Delian Alliance Industries are building: GPS-denied navigation, passive sensor fusion, real-time jamming, and machine-speed strike systems designed for contested environments. The MOD will also establish a CyberEM Command, fusing cyber operations and electromagnetic spectrum dominance into a coherent domain, and bring export controls back inside its procurement portfolios.
The industrial base, too, is set for rearmament. The Secretary of State’s foreword promises always-on munitions manufacturing, six new energetics plants, and 7,000 long-range missiles. This "arsenal pipeline" aligns closely with our submission's call for permanent surge capacity—one that doesn't require geopolitical shocks to get moving.
The review also validates several of our specific proposals. It adopts our segmentation model of procurement timelines, including a commitment to let contracts for novel capabilities in as little as three months. It even gestures toward our recommendation that the MOD hold security clearances on behalf of start-ups, committing by April 2026 to "reform regulations, Intellectual Property handling, and security clearance requirements" as part of a broader package to reduce barriers for industrial partners. And it acknowledges, in language echoing our submission, that defence procurement is bogged down in Cold War-era cycles that are no longer fit for purpose.
But critical gaps remain
Yet for all this progress, the SDR still falls short in critical ways.
First, the MOD stops shy of creating a truly arms-length procurement agency with the freedom to run rapid-fire competitions and iterative fly-offs. Instead, power remains concentrated in the traditional hierarchy, now coordinated by a new National Armaments Director. While the role is centralised, it is not independent, nor is it led by external commercial talent. Without outside leadership, institutional gravity may pull good intentions back into old habits that we’ve documented in detail in our work on European Dynamism in late 2023.
Second, start-ups still face massive onboarding friction. While the clearance proposal was positively signaled in passing, implementation details remain vague. There is no firm delivery date, no operational framework, and no broader reform of Single-Source Contracting or Defence Standards. The UK’s most capable dual-use founders will continue to ask themselves: do I build for the MOD, or ship globally?
Third, the review ducks the capital question. While a “Defence AI Investment Fund” is trailed for 2026, there is no sovereign growth vehicle capable of taking patient equity risk. Nor is there any resolution to the question of GPU supply for defence AI workloads. In a world where the US has created a secure DoD-dedicated cloud with Microsoft and Palantir, and where countries like the UAE are buying compute at sovereign scale, Britain’s silence on this point is not good enough.
Fourth, the role of defence primes remains largely untouched. Despite the SDR echoing our concerns that many primes prioritise dividends over R&D and struggle to attract AI talent. there is no meaningful restructuring of their role. The Defence and Security Accelerator remains in place, still partially managed by a prime contractor. Nor are there new restrictions to prevent primes from operating innovation units, despite the clear conflict this poses. The review's calls for "streamlining" innovation hubs do not go far enough to ensure that smaller, more agile firms have a fair chance.
Fifth, the review leans heavily on the promise of dual-use technologies to drive both defence capability and economic growth. While that framing is politically convenient, it sidesteps a harder truth: some of the most strategically important technologies have no viable civilian market. In such cases, dual-use thinking delays delivery to the frontline. Our position remains that dual-use is not enough. A track must exist for purely defence-native capabilities.
Finally, the SDR embraces the need for speed in principle but doesn’t always back it up in practice. Despite acknowledging that many "next-generation" capabilities are already commercially available, it still categorises them as future-looking. The timelines for major implementation milestones—2026 and beyond—are out of sync with the geopolitical urgency the UK itself identifies.
A mandate for follow-through
In sum, the SDR embraces many of the right principles at we at Air Street also endorse: speed, autonomy, modularity, digital-first command structures, and a more open relationship with external innovators. But it tempers nearly every radical proposal with institutional caution. The result is a defence strategy that reflects the world as it is, but not yet the speed or scale of change required to meet it.
The next phase will matter even more. The forthcoming Defence Industrial Strategy and Defence Investment Plan are where execution must meet intention. They must go further: enshrining the 10% innovation budget for non-prime startups in statute, creating sufficient domestic compute reserves, deploying capital at large scale, and delivering rapid procurement reform not just in spirit, but in practice.
From blueprint to battlefield: what great would look like in 12 Months
By mid-2026, progress should be visible across five fronts:
UK Defence Innovation operating independently with authority to run competitive trials.
MOD-held security clearance system live and accessible to startups.
Defence AI Investment Fund deployed with venture-scale cheque sizes.
Sovereign compute access provisioned for defence use.
10% novel-tech procurement floor formalised with transparent reporting.
These are not moonshots. They’re the minimum conditions for credibility.
The UK’s Strategic Defence Review shows that it understands the new grammar of deterrence. It embraces autonomy, digital warfare, and distributed production as pillars of credible 21st century military power. But it hesitates where it matters most: the enabling conditions that allow new suppliers to deliver at speed and scale. The review diagnoses the future with clarity. What remains to be seen is whether Whitehall can build the muscles to meet it.
