Defence Industry: Environmental, Social and Governance Requirements

Helen Maguire Excerpts

Wednesday 28th January 2026 Westminster Hall

[Helen Maguire (Epsom and Ewell) (LD)]

It is an absolute pleasure to serve under your chairship, Ms McVey. I thank the hon. Member for Windsor (Jack Rankin) for securing this important debate.

Private investment is the lifeblood of our defence industry—now more than ever. In an era defined by geopolitical volatility, from Russia’s brutal invasion of Ukraine to the unpredictable actions of global leaders, defence preparedness must be at the heart of the Government’s agenda. The landscape is shifting. World leaders are recalibrating their strategies, and the private sector is doing the same. ESG-focused funds are increasingly recognising the strategic and ethical imperative of investing in defence. Since Russia’s full-scale invasion in 2022, exposure of ESG European equity funds to aerospace and defence has surged by a factor of 2.7. That is not an anomaly; it is a trend.

There is often confusion from some stakeholders who claim that ESG rules exclude defence companies from sustainable finance, but ESG disclosure and labelling rules do not require defence exclusion. Let me be clear: ESG rules do not exclude defence companies. The confusion is misplaced. Many sustainable funds invest in defence, and those that exclude it typically do so for voluntary ethical reasons or because of reputational concerns, not because ESG rules mandate it. I am pleased that the Government have been clear that they agree there is nothing contradictory between ESG considerations and defence. This position is shared by the Liberal Democrats, who see the industry’s broader structural problems, such as political uncertainty over defence procurement, long production cycles, export controls and delays in Government payments, as the much bigger issue.

Having met many defence companies, including SMEs, I have heard how they are lacking long-term certainty, making it difficult to invest in capacity, innovation and workforce development. Take Labour’s recent indecision on the new medium helicopter contract, which my hon. Friend the Member for Yeovil (Adam Dance) recently alluded to. Delays risk jobs and investment. Meanwhile, the defence investment plan remains unseen. Will the Minister confirm when the plan will be published?

Defence companies, especially SMEs, need certainty. They need to invest in capacity, innovation and their workforce. The war in Ukraine has shown what is possible when industry and Government work together at pace. Yet our current system is failing them. Will the Minister commit to replacing rigid defence reviews with a flexible, continuous assessment of security threats? As part of this, the Government must look to improve collaboration with European and NATO partners to develop new technologies, equipment and training, including via the northern group. Will the Minister therefore give us an update on the UK’s access to the Security Action for Europe fund? Prioritising interoperability with NATO allies and other strategic partners means that we can support each other during peace and war; in times like these, that is paramount.

SMEs are the backbone of the UK defence industry, providing flexibility, innovation and supporting high quality jobs across the UK. However, they face unique challenges that limit their potential to contribute fully to defence capability and UK prosperity. They receive just 5% of the procurement budget, with 42% of contracts going to the same 10 suppliers. That is not just unfair; it is short-sighted, so will the Minister update us on the defence office for small business growth?

We know that the previous Conservative Government bungled defence procurement in our country, overseeing budget overruns and insufficient equipment supplies. It is time for a concerted effort to get behind the defence industry. That means no more delays to vital contracts, and timely and relevant investment plans. That is why the Liberal Democrats will partner with industry to provide the confidence to boost private sector investment in research and development, training and facilities, securing key skills and employment opportunities and ensuring that the economic benefits build the prosperity of UK regions.

To incentivise defence spending, we have also shared our plans for war bonds. Members of the public could loan the Government money in the form of a bond that would run over a period of two to three years and pay out the same interest as standard Government bonds. The bonds could raise up to £20 billion for the military, and would give the public a chance to support our defence patriotically, so has the Minister reviewed those proposals and will she set up a meeting to discuss it in more detail?

The world is changing rapidly. We can no longer rely on old certainties, and thanks to Donald Trump, we can no longer depend on our closest allies. The UK’s defence industry must come first. Will the Minister stand with defence businesses of all sizes and private investors and commit to making the UK a global leader in defence, innovation and resilience?