Written evidence submitted by Ministry of Defence (SSF0013)

Scottish Affairs Committee – “Securing Scotland’s Future: Defence Skills and Jobs”

Introduction

The Ministry of Defence (MO) works for a secure and prosperous UK with global reach and influence. We will protect our people, territories, values and interests at home and overseas, through strong armed forces and in partnership with allies, to ensure our security, support our national interests and safeguard our prosperity.  

The UK’s defence industry is a well evolved ecosystem providing huge social value across the UK as it develops world-class capabilities critical for our national defence, alongside delivering economic prosperity.  The UK’s defence industry is vast and wide ranging – every corner of the UK benefits from these industries, the skills they develop or the contribution they make to UK resilience, operational capability, and growth. 

Scotland, like every part of the UK, plays an important role in the collective defence of our region and global interests, contributing to our security, sovereignty, and prosperity. 

The publication of the Strategic Defence Review (SDR) and the Defence Industrial Strategy (DIS) have outlined the increased challenges facing the UK, and the importance of an innovative and agile defence industry has never been more important, with Scotland being crucial to this success.

Defence Industry in Scotland

Scotland is critical to defence, both in peace and in times of crisis. Its proximity to the waters and skies above the North Atlantic make it a vital strategic asset for the UK and NATO. Key defence capabilities, including the nuclear deterrent and maritime patrol aircraft, are located here, protecting the people of Scotland and the wider UK, and contributing to global security.

Defence is one of the biggest employers in Scotland – in 2023/24, there were approximately 11,800 directly supported industry jobs in defence.[1] Military and civilian personnel at establishments across Scotland support this in myriad ways, as do veterans who continue to serve their country and enrich their communities, bringing highly valued skills and experience to business and the voluntary sector across Scotland. As of July 2025, 9,620 regular military personnel and 2,680 reservists, supported by 3,850 Ministry of Defence civilians, are stationed in Scotland. There are also just under 6,000 cadets across the Single Services.

The MOD continues to invest in Scotland through contracts to build and maintain high-end, cutting-edge equipment for sea, land and air support jobs and develop skills across Scotland. Public and private sector investment and expenditure, including in R&D, contribute to the Scottish economy. Defence industry facilities and partnerships in Scotland underpin the UK’s global standing. ‘Made in Scotland’ benefits Scotland, the wider UK, and beyond. In 2024/25, total MOD spend in Scotland was £2.15 billion, which equates to £390 per person.[2]

A wide range of defence suppliers are located in Scotland. These include: Leonardo UK providing surveillance radars and countermeasure systems from Edinburgh; Thales providing electro-optical systems from their base in Glasgow; BAE Systems and Babcock International operating shipyards in Rosyth and the Clyde; and Chemring Energetics UK providing design, manufacture assembly, testing and through-life support of energetic technologies in Ayrshire. Boeing UK, meanwhile, are a long-term strategic partner for defence in Scotland, with their facility at RAF Lossiemouth supporting the operation of Poseidon P-8A maritime patrol aircraft.

The commitment to increase defence spending to 2.6% will have an impact on the defence industry in Scotland. We want to work with Scottish Government in a manner that respects both the devolution settlement and defence priorities in Scotland, to ensure the Scottish Defence Industry benefits from this.

Question One: How can Scotland benefit from increased UK defence spending?

1a. What can be done to ensure the economic benefits of increased defence spending be shared throughout Scotland?

Defence spending is rising in line with the external threat to the UK. The main growth effect of the spending will be to maintain peace and security, which underpins all economic growth. The growth impact of peace in Scotland is incalculable, just as it is for the rest of the UK but is shared equally to all citizens throughout Scotland and the UK.

The increase in defence spending will have additional supply side impacts across the UK, which will drive productivity and sustainable economic growth. The supply side effects are:

• Increased commercialisation potential as a spillover effect from defence-related R&D;
• Higher levels of transferrable skills due to training and human capital acquisition in the military and the domestic defence industries, which enables improved pay.
• Greater agglomeration potential and regional wage premiums as clusters of defence industry interact with comparable civilian industries, boosting the supply of skilled workers and facilitating innovation.
• Increased competition; because of greater SME involvement, which can drive efficiency, cost-effectiveness, improved supply chain and higher-quality outputs.

In addition, defence spending helps to well-paid especially in relatively deprived areas, thereby supporting and boosting those localities.

As a major centre of the UK defence industry, the Scottish economy will benefit from all the above effects. The MOD will seek to maximise these through the policies set out in the Defence Industrial Strategy, such as the Office of Small Business Growth, as well as locally based teams, such as in the Defence and Security Accelerator (DASA), to ensure companies across Scotland have opportunities to benefit from this increased spending.

1b. What projects showcase how the benefits of such investment can be spread, particularly in rural communities?

Defence investment, DASA, has had a positive impact on supporting businesses, including SMEs, throughout Scotland. DASA has provided funding worth over £27 million to more than 40 organisations that cover over 130 projects in Scotland.

These include:

• Stirling-based QuickBlock,[3] whose innovative flat-pack building block system started its life as a civilian product for disaster relief and humanitarian aid structures. Through funding and guidance from DASA, QuickBlock have grown their business and secured orders from defence, including the British Army for training purposes.
• Aberdeenshire-based Glic Ltd, who have developed an autonomous vehicle-to-trailer connection system that connects and disconnects a trailer to or from a towing vehicle without human intervention.[4] DASA introduced Glic to the possibility of funding to adapt their Smart Hitch technology for military use and, following a successful DASA funding bid, Glic were able to develop their software and test Smart Hitch with the British Army.

Following DASA funding, SMEs based in Scotland will typically use a Scottish supply chain for subcontracting their projects. So, in addition to the direct impact on the SME, there are also positive secondary impacts on the wider local and Scottish economy in delivering their defence capability.

We have also seen SMEs in Scotland that have been funded through DASA go on to secure additional equity investment, supporting the business and the broader economy further.19 Scottish SMEs have raised £16.45 million in equity investment post-DASA funding, creating additional new jobs.

1c. How can increased investment ensure the creation of highly skilled and highly paid jobs?

The shipbuilding sector has said that the strongest determinant of job creation is providing the certainty of a pipeline of contracts – the demand signal. By contrast, short term decision making – contract by contract – almost guarantees the use of itinerant labour. This is a statement that can be replicated across multiple defence sub-sectors.

The DIS emphasises certainty and stability in defence contracting as a key enabler for industry investment and the UK defence industrial base. We have committed to publishing a five-year acquisition pipeline of planned procurement to provide transparency to industry so that companies can plan investment decisions accordingly. This is in addition to publishing a Defence Investment Plan (DIP) with a 10-year horizon. Together with reforms to procurement that will reduce delays and improve delivery, this will incentivise the defence industry to invest in higher-end capabilities that lead to highly skilled and highly paid jobs.

The UK Government’s recent deal with Norway to supply their armed forces with Type 26 frigates – the UK’s biggest ever warship export deal by value – is an illustration of this. The deal will support 4,000 jobs across the UK supply chain until well into the 2030s, including more than 2,000 at BAE Systems’ Glasgow shipyards. The programme is also expected to support 432 businesses, including 222 SMEs, across the UK, including 103 in Scotland.

Additionally, the UK and Indonesia have agreed a landmark Maritime Partnership Programme (MPP) worth £4 billion. This will see ships being built in Indonesia using British shipbuilding expertise, helping to support 1000 jobs in the UK, the majority of which are expected to be in Rosyth.[5]

Increased investment in skills and education is a critical enabler for creating highly skilled and highly paid jobs, particularly in sectors like defence, which require a highly specialised workforce. Through the Defence Industrial Strategy, the UK Government has committed to fostering a world-class defence sector by investing in the development of skills across the entire career pathway. This includes a £182 million defence industry skills package, which is designed to ensure that the workforce of today and tomorrow is equipped to meet the evolving demands of the defence sector.

In Scotland, several key initiatives are being implemented to support this goal:

• Destination Defence: A communications campaign aimed at raising awareness of the diverse and rewarding career opportunities within the defence sector. This initiative seeks to improve the sector’s reputation and attract new talent.
• UCAS Defence Portal: A dedicated portal on the UCAS website to promote defence careers, including graduate roles and apprenticeships, making it easier for individuals to explore opportunities in the sector.
• Graduate and Apprenticeship Clearing System: This system enables oversubscribed prime contractors to share applicant information with the wider defence supply chain, ensuring that talented individuals can find alternative opportunities to develop the same critical skills.
• Defence Universities Alliance: A strategic network of UK higher education institutions committed to partnering with the Ministry of Defence and the defence industrial sector to deliver cutting-edge education and research.
• Defence Skills Passport: A digital record of an individual’s skills and experience, designed to enhance career mobility and skills growth within the defence ecosystem. This initiative is particularly focused on retaining and attracting mid-career talent.

£20 million from the defence industry skills package is also being directed towards skills initiatives in Scotland, Wales, and Northern Ireland. Through the Defence Growth Deal governance framework, the Ministry of Defence is working with Devolved Governments, industry, educational institutions, and other stakeholders to identify and fund skills initiatives that strengthen the defence sector in these nations.

By investing in these initiatives, the UK Government is not only addressing current skills gaps but also future proofing the defence sector. This ensures that the UK remains a global leader in defence innovation and manufacturing, while creating high-quality, well-paid jobs across the country.

Question Two: What are the key skills gaps in Scotland’s defence sector, both now and in the future?

2a. What are the main barriers to attracting and retaining talent in Scotland’s defence sector?

There are several barriers to attracting and retaining talent in Scotland’s defence sector. These include:

• Perception of Defence Careers – defence-related employment is viewed less favourably than other sectors, particularly amongst the younger generation. Defence roles are often perceived narrowly as being linked to the Armed Forces or to weapons manufacturing, despite the sector encompassing a wide range of careers including engineering, technology, research and cyber. This lack of broader understanding could limit the talent pipeline.
• Public attitudes – geopolitical factors, as well as broader public debates around defence spending, could shape perceptions of the sector, potentially leading to a more cautious or pessimistic view of working in defence. This directly translates to numbers of young people considering or seeking to work in the sector.

• Scotland's geographical position in the UK – means some key defence sites are in areas with limited housing or transport links, making relocation to Scotland less attractive than other industrial centres across the UK. This may be especially limiting for middle- to late-career professionals with families.

• Lack of a national skills framework – skills and training are devolved and, as a result, there is no UK-wide, coordinated national skills framework. This can lead to inconsistencies in how defence-related skills are prioritised and developed across the UK.
• Apprenticeship Levy – UK-based companies cannot draw from their England pot to fund apprenticeships in their Scotland-based operations. The Scottish Government receives a Barnett share of Apprenticeship Levy funding, but does not routinely allocate this towards defence-related apprenticeships or training programmes.

To address these barriers, the Defence Industrial Strategy announced a £182 million skills package encompassing a range of initiatives aimed at improving the attractiveness and accessibility of careers in the defence sector. This includes Destination Defence, which will play a vital role in raising awareness of the diverse opportunities available within the sector. This campaign aims to improve the public perception of defence careers, encourage individuals to consider joining the sector, and bolster the overall reputation of defence as a forward-thinking and inclusive industry. Together, these efforts are helping to break down barriers, attract new talent, and ensure the defence sector remains competitive and sustainable in Scotland and across the UK.

2b. How are these skills gaps inhibiting the full potential benefits of increased investment and defence spending?

Shortages in critical defence industrial skills have several adverse effects on the defence industry. They constrain supply chains and limit the potential for further development and growth. This is particularly damaging to SMEs, who are then unable to compete for skilled labour. There is a knock-on impact to the wider economy as a result of this, hindering local economic growth.

Skills gaps also impact the delivery of defence projects. Industry in Scotland have highlighted a shortage in trade and technical skills, in particular welders, fabricators, pipe fitters, mechanical fitters and electricians. Without these key skilled workers, critical work, often in advanced manufacturing and engineering, cannot progress at the pace it needs to. This impacts delivery timelines for major defence programmes that take place in Scotland, such as shipbuilding.

2c. What role can the UK Government play in ensuring the skills and training needs of Scotland’s defence sector are met?

While skills and education are devolved matters, the UK Government can play a supporting role in ensuring that Scotland’s defence sector skills and training needs are met.

Alongside the DIS, the Government announced a £182 million defence industry skills package that will attract, develop and retain a high-skilled, well-paid UK defence workforce both now and into the future. This package includes several initiatives that have applicability in Scotland: Destination Defence, a communications campaign aimed at raising the profile of a career in defence, encouraging people to join the defence sector, and improving the sector’s reputation; a defence portal on the UCAS website, which will promote and support defence sector careers; and the Defence Skills Passport, which will enable the smoother transfer of mid-career professionals between the Armed Forces, the defence industry and into the sector from neighbouring industries.

£20 million has also been allocated for skills initiatives in Scotland, Wales and Northern Ireland. Through the Scotland Defence Growth Deal, we will work with industry, academia and other key stakeholders to assess Scotland’s skills needs and identify how that funding should be used to address these. As an early example we recently intervened to support Malin to construct a cutting-edge welding facility that contributes to both the submarine enterprise and training up a skilled workforce.

The UK Government is also responsible for supporting veteran’s transition into defence-related roles, which would help address current skills gaps.  The report Veterans Work: Then & Now[6] (published in 2024 by Deloitte with the MOD as part of the Steering Committee for its development) highlighted the significant ‘untapped potential’ of veterans, noting the following key findings:

• Employers report skills gaps in areas where veterans excel, such as strategic management, teamwork, and programme design.
• Three of the five skills expected to be increasingly important in the future of work – planning and organisation, problem-solving/adaptability, and teamwork – are areas where veterans are highly rated.
• Six in ten employers report challenges in finding these skills, both at senior management levels and in roles below senior management.

To address these challenges and support veterans in transitioning into defence-related roles, the Ministry of Defence has implemented several initiatives, including:

• Career Transition Partnership (CTP) – the CTP serves as the primary employment support service for individuals transitioning out of the Armed Forces. This ‘no-cost’ service is designed to assist Service Leavers in securing civilian employment, pursuing further education, or undertaking vocational training. Support is available from up to two years before leaving service and continues for up to two years afterwards.
• Op ASCEND – this is a programme available to veterans who are more than two years post-service, as well as their families. Delivered by the Forces Employment Charity, it connects veterans with employers and provides clear, accessible career pathways into roles across eight strategic sectors:

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• Data and digital (including cyber and telecoms)
• Defence and security
• Construction (including infrastructure)
• Energy and renewables
• Finance and professional services
• Health and social care
• Logistics
• Manufacturing (including maritime and aerospace)

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Op ASCEND also supports employers in the recruitment, retention, and career progression of veteran talent. As of June 2025, the programme has successfully engaged over 420 employers and supported more than 5,000 veterans and their family members.

• Veterans Industry Programme (VIEP) – the VIEP is a free, government-backed service designed to help organisations adopt veteran-friendly practices and behaviours. Delivered by the charity Mission Community, the programme works with trade bodies and employers in specific sectors to ensure that veterans’ skills are fully recognised and valued. It also helps organisations leverage the talents and expertise of veterans to enhance their workforce.

Through these initiatives, the UK Government and its partners are working to bridge the skills gap while ensuring that veterans are supported in their transition to civilian careers, particularly in defence-related and other strategic sectors.

In May 2024, the Nuclear Skills Plan was published, agreeing commitments to ensure the nuclear enterprise has the right skills. The Nuclear Skills Plan is generating success, with nearly 4,000 early career starters projected to have entered the sector in 2024/25. An additional 20 nuclear fission PhD students have been funded as a direct result of the Nuclear Skills Plan, supporting a pipeline of future subject matter experts.

The Nuclear Skills Plan is actively building a long-term pipeline of talent to meet workforce demands across the submarine enterprise, the broader Defence Nuclear programmes, and the civil nuclear sector. It is expanding apprentice, graduate, and doctoral training opportunities across the nuclear sector, working in collaboration with defence and civil primes to ensure a consistent supply of skilled individuals into critical roles.

The Defence Nuclear Enterprise (DNE) offers quality skilled jobs giving people the opportunity to have a well-paid career and to contribute to a vital national mission, working on some of the most complex and advanced programmes ever undertaken in this country. The DNE is aiming to double its nuclear apprentice intake to create 22,000 apprenticeships over the next 10 years. The projected is expected to support 65,000 highly skilled, well-paid jobs by 2030 and already maintains a supply chain of around 3,000 businesses across the UK.

The National Shipbuilding Office (NSO) is also collaborating with the shipbuilding sector in Scotland, including the Shipbuilding Skills Delivery Group, to better understand future skills requirements and to make provisions for training and development.

Following the publication of the Immigration White Paper in May 2025, the Home Secretary commissioned the Migration Advisory Committee to advise on a new Temporary Shortage List. Their advice will include detail on:

1. Occupations that are crucial to the delivery of the Industrial Strategy or critical infrastructure.
2. Which of the occupations identified as crucial to the delivery of the Industrial Strategy or critical infrastructure should be included on the Temporary Shortage List. This will include an assessment of sector Workforce Strategies to maximise use of the domestic workforce.
3. The terms and conditions for the Temporary Shortage List visa, such as visa caps and visa lengths.

Ahead of the Migration Advisory Committee publishing their final report in July 2026, the MOD will work with industry and other key stakeholders to assess which defence-critical occupations should be added to the Temporary Shortage List. This will take into consideration the needs of Scotland’s defence sector.

2d. What role can defence innovation and collaboration clusters play in developing skills and jobs in the sector, and how can the UK Government support them?

The Strategic Defence Review highlighted the impact that regional clusters have in supporting defence industries across the United Kingdom.[7] Regional Defence and Security Clusters, supported by the MOD (including DASA and UKDI) are already bringing benefit across England and lessons learned from the development of these could be applied to the development of defence and security clusters in Scotland. Early-stage discussions have taken place with potential partners in Scotland around a Regional Defence and Security Cluster and these discussions will continue into 2026.

There are also a number of clusters and cluster-like organisations in Scotland that overlap defence. This includes the Scottish Government’s Innovation Centres, Space Scotland, West of Scotland Space Cluster, Scottish Maritime Cluster and the recently announced Scottish Government funding for clusters in critical technologies such as space, robotics, semi-conductors and quantum. There are also several organisations which SMEs can pay to join that provide collaboration and networking opportunities, such as ADS Scotland and Scottish Engineering.

2e. How can collaboration with other sectors, such as energy and advanced manufacturing, enhance the impact of these initiatives on jobs and skills?

The war in Ukraine has shown that, when faced with extraordinary and urgent threats or conflict, defence is an all-of-society challenge. The DIS illuminated how energy is a key strategic capability that can drive operational advantage and build resilience. Harnessing opportunities from dual-use energy technologies will build operational advantage and resilience for defence while driving economic growth for the UK and supporting the UK Government’s clean energy mission.

Opportunities exist for defence to tap into existing industry skills and expertise in Scotland’s other sectors, such as energy, civil nuclear and advanced manufacturing. For example, the development of offshore wind infrastructure is leveraging large-scale engineering expertise and driving innovation in dual-use materials. Defence can adopt emerging clean technologies, which could create new roles linked to, for example, hybrid propulsion, power generation and energy storage.

The Clean Energy Jobs Plan highlights the growth of the energy sector in Scotland and the potential for dual opportunities with defence, given the growing importance of energy for operational advantage and resilience.[8] For instance, the number of jobs supported by clean energy industries could almost triple in Scotland, as the sector grows from around 440,000 jobs in 2023 in the UK to support 860,000 jobs by the end of the decade. Additionally, over one in six science, research, engineering, and technology professionals working in clean energy are expected to be in Scotland by 2030. This offers opportunities for cross-sector innovation and workforce development for the defence and energy sectors. Defence can tap into this growing talent pool, fostering dual-use technologies and addressing critical skills gaps in STEM.

2f. What impact is skills and workforce competition with other sectors having on Scotland’s defence sector?

The competition for skilled labour from other high-growth sectors in Scotland presents both challenges and opportunities for the defence sector. While industries such as clean energy, space, and advanced manufacturing are drawing from the same pool of engineering and technical talent, this dynamic also creates significant potential for collaboration, innovation, and shared learning. The Defence Industrial Strategy strongly emphasises the importance of dual-use subsectors, which can bridge the gap between defence and other industries, fostering cross-sector partnerships and enabling the transfer of skills and technologies.

Feedback from the Shipbuilding Skills Delivery Group, for example, has highlighted that sectors like grid infrastructure and offshore wind are key competitors for talent. However, these sectors also offer opportunities to develop complementary skills and expertise that can benefit Scotland’s defence sector. By working together, industries can create a more resilient and adaptable workforce, capable of meeting the demands of both defence and other high-growth areas.

While competition for talent can drive up wage costs and create recruitment challenges, it also incentivises the defence sector to innovate in its approach to workforce development, ensuring it remains an attractive and competitive career choice.

The UK Government is actively addressing these challenges through the £182 million skills package announced alongside the Defence Industrial Strategy, which aims to strengthen the skills pipeline and support the development of a highly skilled workforce. The Scottish Government, with devolved responsibilities for education and skills, also plays a critical role in aligning training and education initiatives to meet the needs of both the defence sector and other industries

2g. What are the potential benefits and limitations of a Defence Skills Passport?

The Defence Skills Passport, one of the initiatives in the £182 million skills package that was announced alongside the DIS, will act as a digital record of an individual’s experience and skills. Under the direction of the Defence Industrial Joint Council, the Defence Skills Passport is currently in the scoping phase, with aspirations to launch a pilot in February 2026.

The Defence Skills Passport has several intended benefits for new entrants, experienced hires, employers, and government. By standardising and documenting qualifications, competencies, and experience, it will enable the smoother identification and transfer between the Armed Forces, defence industry and those looking to re-enter from neighbouring industries, such as advanced manufacturing. This could help address skills shortages, optimise workforce deployment, and ensure that the expertise of apprentices, graduates, and experienced professionals is fully utilised. Moreover, it could encourage retention by providing clear career pathways and opportunities for progression, while also attracting new talent by showcasing the sector’s commitment to professional development and skills portability.

Question Three: What role should Scotland’s Defence Growth Deal and Defence Industrial Strategy play in creating and sustaining high quality jobs in Scotland?

3a. How can local economies best benefit from the Defence Growth Deal?

Scotland brings a dynamic mix of growth industries to the UK's defence capabilities, from a rapidly advancing space sector to next-generation maritime innovation centred around the Clyde and Rosyth. The Scotland Defence Growth Deal will combine defence and wider government investment to harness these local sub-sector strengths, drive innovation, and deliver tailored support where needed, such as in skills, to boost local economies, attract private investment, and ensure long-term sustainability.

More broadly, the DIS presents a wealth of opportunities for Scotland that will help reinforce its position as a key player in the UK’s defence and security landscape. These opportunities include:

• Economic Growth and Job Creation: With £773 million in record investment, the Defence Industrial Strategy will drive economic growth in Scotland, creating thousands of high-skilled jobs in sectors such as shipbuilding, aerospace, and cyber security. A prime example of this is the recent £10 billion sale of Type 26 frigates to Norway, showcasing Scotland's world-class shipbuilding capabilities and further bolstering the economy through international defence exports.
• Boosting Innovation and Technology: Scotland’s strong academic and research institutions, such as the University of Edinburgh and the University of Strathclyde, are well-positioned to lead in cutting-edge research areas like AI, quantum computing, and advanced manufacturing. The DIS will provide funding and opportunities to accelerate these advancements through initiatives like UKDI, ensuring Scotland remains at the forefront of defence innovation.
• Strengthening International Partnerships: The DIS’s focus on forging new partnerships aligns with Scotland’s existing collaborations with NATO allies and other international partners. Deals like the Type 26 frigate agreement with Norway and the new Maritime Partnership Programme that will see the UK and Indonesia jointly develop maritime capability for Indonesia’s navy.
• Regional Development: The DIS emphasises the importance of spreading economic benefits across the UK. Scotland’s defence industry, with its established hubs in Glasgow, Rosyth, and Prestwick, is set to benefit from increased investment and support, driving regional development and prosperity, particularly through initiatives like the Scotland Defence Growth Deal.
• Sustainability and Future Technologies: Scotland’s expertise in sustainable shipbuilding and autonomous maritime technologies positions it as a leader in the development of environmentally friendly defence solutions, aligning with the DIS’s focus on future technologies and sustainability.
• Backing UK Based Business: The DIS announced the launch of a consultation to explore the possible introduction of a UK offset policy to ensure secondary benefits are achieved from defence import procurements to drive economic growth in the UK targeted at supply side economic benefits such as licensed and co-production, technology transfer and investment in skills; key outcomes that result in jobs and growth in defence, including in Scotland.

Increased defence spending as a result of the Scotland Defence Growth Deal will have additional supply side impacts for local economies across Scotland, driving productivity. These benefits include increased commercialisation potential from the spillover effect of defence related R&D, greater workforce upskilling and increased employment opportunities, as well as greater opportunities for collaboration and higher regional wage premiums due to agglomeration between defence and other related industries.

3b. How can the Defence Growth Deal and Defence Industrial Strategy ensure the retention of digital and cyber talent in the defence industry in Scotland?

The DIS and Defence Growth Deal will support the retention of digital and cyber talent in the defence industry in Scotland. The Defence Industrial Strategy named cyber as a critical dual-use sub-sector, while the Defence Growth Deals will act as a catalyst for combining defence and wider government investment to harness local sub-sector strengths, drive innovation, and deliver tailored support where needed. In doing so, the Defence Growth Deals will seek to leverage initiatives such as TechFirst, a £187 million tech skills and opportunities fund that will support over 4,000 domestic graduates, researchers and innovators and engage 1 million students in digital skills and AI learning.

Delivered across the UK, the programme builds the tech skills pipeline, strengthens supply chains, and activates sector growth through its schemes like:

• TechYouth – funding a national learning platform (scaled up ‘Cyber Explorers’) and appointing regional delivery partners across the UK to meet the PM ambition of inspiring 1 million UK students with AI and tech learning by 2029.   
• TechGrads – an undergraduate scholarship programme reaching 900 domestic students annually, including 100 annual places for Research MSc in key digital and tech sectors. The AI Sparck Scholarship programme is separate, but aligned, to this work. 
• TechExpert – supporting 500 domestic PhD students with a 50% stipend top up (max value £10,000), focusing on critical, and next generation questions on digital and tech issues like AI adoption, post quantum cryptography, cyber security threats. 
• TechLocal – funds innovation in recruitment and career pathways, enabling people with tech skills to directly benefit from the growth of frontier technology sectors whilst helping employers to see the value of employing skilled people, through better paid job opportunities.  

The Department for Science, Innovation and Technology (DSIT) is working closely with the Scottish Government to shape the delivery of TechFirst in Scotland. This will ensure TechFirst aligns with existing digital skills initiatives, maximising the programme’s impact and strengthening Scotland’s tech skills pipeline.

Question Four: To what extent are Scottish-based suppliers integrated into defence supply chains, and what impact is this having on jobs and investment?

4a. How effective are current Ministry of Defence (Ministry of Defence) and industry engagement mechanisms with SMEs in Scotland?

Through the DIS, we are taking specific steps to reform the whole system to better support SMEs, working closely with our major contracts and investors/capital providers to make sure that SMEs are supported throughout the defence supply chain.

We have announced an ambitious, but achievable, target to spend £7.5 billion annually with SMEs by 2028, a 50% increase from the 2023/24 baseline. We will deliver this target by:

• Establishing the Office for Small Business Growth – this will support SMEs with three key services: design SME involvement into the defence portfolio (shape); guide SMEs and Ministry of Defence teams on how to facilitate SME entry into the defence supply chain (advise); and support SMEs to rapidly scale-up and grow their business within defence (grow).
• Introducing a new SME-specific Commercial Pathway – which will enable the Ministry of Defence to develop and present requirements in an SME friendly way, reducing bureaucracy and moving at pace.

DASA also plays a role in supporting industry engagement with SMEs in Scotland. They work with both traditional and non-traditional innovators, including SMEs, within the innovation ecosystem. This includes connections with all Scottish universities, the Scottish Innovation Centres, the Scottish Enterprise Agencies, Scottish Development International, and other areas of the Scottish Government.

Support is also provided through connections with the Catapults in Scotland and national organisations such as the National Manufacturing Institute Scotland, National Robotarium, National Subsea Centre, National Decommissioning Centre, Space Scotland, ADS Scotland and Scottish Engineering.

4b. What barriers do Scottish SMEs face in engaging with the Ministry of Defence?

The DIS consultation attracted 200 responses from a range of stakeholders, including SMEs, academia, primes and non-traditional defence companies. This includes Glasgow-based Skyrora, who focus on designing and manufacturing launch vehicles for small satellites and portable launch systems, and Spirit Aerosystems, who manufacture aerostructures for commercial airplanes, defence platforms, and business/regional jets based in Prestwick.

The consultation highlighted several barriers that SMEs face when attempting to engage with the MOD. While some of these challenges are well-documented, such as complicated procurement processes and complex requirements, the consultation highlighted additional obstacles that hinder SMEs from entering the defence sector. These barriers not only deter SMEs from participating but also prevent the Ministry of Defence from fully benefiting from the innovation, expertise, and agility that SMEs can offer. The key barriers identified include:

• Complicated procurement processes – lengthy and complex procedures can discourage SMEs from participating in defence contracts.
• Financial constraints – limited resources and cash flow challenges make it difficult for SMEs to compete, particularly when faced with the upfront costs of bidding for contracts.
• Access to finance – the lack of regular defence contracts can make it harder for SMEs to secure funding or investment, as the irregularity of opportunities creates financial uncertainty.
• Complex requirements – the technical and administrative demands of defence contracts can be overwhelming for smaller businesses with limited capacity.
• Uncertainty about how to engage with the defence industry – many SMEs are unsure of how to navigate the defence sector, including understanding the processes, points of entry, and opportunities available.

The Defence Industrial Strategy set out our commitment to revamp our procurement framework, delivering a comprehensive review of defence contracting to incentivise productivity and improve delivery, while also setting out practical measures to improve our engagement with SMEs. This includes the Office for Small Business Growth, which will:

• Help the MOD implement procurement strategies that provide opportunity for SMEs to win work within the supply chain.
• Help prime suppliers provide a more consistent and supportive experience for SMEs within their supply chains.
• Provide better access to opportunities through equality of information and market engagement (a delivery route for industry’s request for a stronger demand signal).
• Improve advice and support to SMEs on export matters.
• Provide a confidential channel for SMEs to raise concerns or discuss the unique challenges they face.
• Better cohere UK Defence Sector Supplier Development and scale up support across Government, trade associations and prime suppliers.

We have also announced a target to increase our spending with SMEs by £2.5 billion by May 2028. These measures, combined with the Ministry of Defence SME Action Plan and a new dedicated SME Commercial Pathway, will improve SME access to defence opportunities.

With DASA staff based in Scotland, SMEs also benefit from a personalised service connecting them to DASA, UKDI, and the wider MOD. DASA’s work with the Enterprise Agencies, and the wider investment community, has built a strong brand presence for Ministry of Defence in Scotland through its innovation function. DASA is often viewed not only as the gateway to MOD innovation but also as a broader entry point to the MOD. The physical presence of DASA staff, who actively engage with SMEs and are integrated into the support ecosystem, is highly valued and essential to the Scottish ecosystem.

4c. How can Scottish SMEs in rural communities better collaborate with the Ministry of Defence?

Measures introduced in the DIS will support Scottish SMEs in rural communities to collaborate with the MOD. For instance, the SME Action Plan introduced a new package of dedicated support for SMEs, which will provide guidance and highlight opportunities to gain access to financial and growth capital support. These measures introduced in the DIS will cohere all SME support into a single place, making access simpler and easier for every SME, no matter their location. Scottish SMEs in rural communities will also benefit from the MOD’s commitment to spend £7.5 billion with SMEs by May 2028.

Scottish SMEs in rural communities can also be supported to collaborate better with the Ministry of Defence through greater opportunities for direct access through organised meetings and events. Scotland’s Innovation Partner has been instrumental in engaging communities and SMEs across rural, as well as urban, Scotland. DASA has held SME engagement events and surgeries in the Scottish Highlands, Islands and across the rural communities of the South of Scotland, as well as within areas of the Central Belt which attract SMEs from rural areas. This active engagement and a proactive presence are crucial for SME collaboration.

4d. How can SMEs in Scotland’s defence supply chain be supported in creating and retaining high-quality jobs? 

The Defence Industrial Strategy outlined several measures to support Scotland’s defence supply chain, including SMES, and support the creation and retention of high-quality jobs. Measures discussed previously, such as the defence industry skills package and the £20 million set aside for skills initiatives in Scotland, Wales, and Northern Ireland, will contribute to supporting job development and retention for SMEs in Scotland. The Defence Universities Alliance and the Graduate and Apprenticeship clearing system will also support SMEs in attracting talent. Additionally, providing funding to SMEs for developing low to mid-level Technology Readiness Level (TRL) innovations is another effective way to create and sustain high-quality jobs. This is already facilitated by DASA through its themed competitions and the Open Call for Innovation.

Directing more funding at pre-apprenticeships would ease the burden on SMEs by removing the first year of training of an apprenticeship. SMEs could be further incentivised to hire apprentices through government support for flexi-job apprenticeships, where individuals rotate around multiple employers over the course of their training. This would both make use of training capacity in SMEs and also help them meet even the average target of 2.9% of employees in training. The most recent Skills Gap Analysis from the trade body Scottish Engineering shows that in order to meet anticipated demand, industry as a whole needs to double this so that apprentices make up at least 5.8% of workforce.[9]

December 2025

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