Defence Sector Banking Services: Environmental, Social and Governance Rules

Lord Sharpe of Epsom Excerpts

Monday 26th October 2026 Lords Chamber

Asked by

[Lord Sharpe of Epsom]

To ask His Majesty’s Government what progress they have made in reforming environmental, social and governance rules to ensure that they are not used by financial institutions to deny banking services, including loans, to the UK defence sector.

[The Parliamentary Secretary, HM Treasury (Lord Pitt-Watson) (Lab)]

My Lords, I thank the noble Lord, Lord Sharpe, for his interest in this issue. It is timely because, in response to his and other work, today the FCA has confirmed there should be no sustainability requirements and no FCA regulatory barrier preventing banks and other financial institutions supporting the defence sector. I have the publication with me; it requires good practice from financial firms. I hope that goes some way to addressing the concerns the noble Lord has been raising.

[Lord Sharpe of Epsom (Con)]

I thank the Minister for that Answer, and I am very grateful to him for it, because it is encouraging. The reason I am asking this Question again—the second time in 18 months—is that I was recently contacted by two ex-Army officers who have developed a novel counter-drone technology. They had secured a £700,000 grant from Innovate UK but were in danger of losing that grant because they had nowhere to put it. The banks said that they could not open an account on the ex-Army officers’ behalf “because of the nature” of their business. Can the Minister press home the importance of this new FCA report directly to the banks? Perhaps he could invite them to the Treasury and explain that defending the nation is not only profoundly ethical but a moral imperative.

[Lord Pitt-Watson (Lab)]

I am in entire agreement with the noble Lord, Lord Sharpe, on this. To be clear, no legitimate company should be excluded from financial services solely because it operates in the defence sector. I can confirm that, as a first step, the FCA will be writing to all financial firms today to make that expectation absolutely clear. Again, I thank him and the many other people from all political parties who have been campaigning on this important issue for some time.