The DIP: Looking beyond the numbers

The Defence Investment Plan (DIP) has (finally) arrived.  A short look on LinkedIn afterwards contained the usual predictable script of headline numbers, a flurry of press releases and a wave of descriptive commentary.  This is less useful in one month from now when attention turns to what does this actually mean? 

Below we focus on some interesting themes (big and small) which look beyond the headline numbers which are well documented. 

1. Moving slower than the mission requires

There is a clear and present adversary problem and the DIP is clear in that we are now going to move much slower than the mission requires.  The wider publicly stated references to “war readiness” are deliberate.  The plan should have been far more aggressive to 2030 but instead it soft-pedals into 2035 (which is the post-election period the document explicitly leaves "unallocated").   There will be army chiefs who are fuming… 

If the SDR was about direction, the DIP's job was to detail the funding.  What the DIP has done is reveal a (very) large gap.  Two ministers resigned in the run-up.  This is the DIP the Treasury was willing to fund, not the DIP the CDS asked for.

2. Defence should be learning from civilian markets, not the other way round

The DIP commits to examining "how defence tech can be exploited for civilian purposes."  It should instead be viewed as what defence can learn from the civilian markets.  Much of defence technology is already too advanced and too expensive for civilian markets to absorb - the average citizen does not need to track their car using RF, cellular and satellite triangulation simultaneously. 

There are of course genuine exceptions such lessons from operating uncrewed systems in GPS-denied environments in Ukraine translate directly into civilian applications but these examples are limited.

Civilian markets can iterate in weeks.  Defence procurement iterates in years.  F1 iterates in days because the regulatory framework, the supply chain and the risk appetite all permit it. Defence has none of the three.  This is where ideas should be sought. 

The NAD Group inside the DIP is the closest thing the document has to a buy-break-iterate model which will hopefully evolve into an entity with the authority to procure at civilian cadence for novel systems.

3. The Digital Targeting Web is one of the most important but also underfunded parts of the DIP

The DIP commits £7.5bn to the Digital and Targeting Web across this parliament, with "at least £17bn" earmarked for 2030–2035.  The larger figure sits in a spending window the document explicitly leaves unallocated.  The pattern is familiar - announce the scale, place the real money in a future spending review that has not happened but take the credit today.

This matters more than the usual backloading complaint because the Digital Targeting Web is not a platform.  It is the connective tissue that determines whether everything else in the plan actually works.  In modern warfare, the decisive variable is not the quality of a static capability, but it is the speed at which a capability can be modified in combat. Connecting sensors, deciders and effectors faster than the adversary is more valuable than any individual weapon system.  The funding structure is back-to-front. 

4. Private capital will be critical

The multiple references to private capital throughout the document are intentional and structural. The language throughout is not of procurement but of industrial policy.  Private capital is being asked to close the gap between what the SDR set out to achieve and what HM Treasury was willing to put on the balance sheet. 

The SDR cannot and will not be fully delivered from the public purse alone.  Step-forward private capital.  Private Capital has played an important and growing role in Defence and National Security in recent years.  This is set to increase. 

5. AI ambition and energy policy are pointing in opposite directions

The DIP references AI extensively - Taskforce RAID, Project FRONTIER, a Defence AI Centre, AI embedded across the Digital Targeting Web, the Hybrid Navy and more.  The document is very candid in one place - "Compute has emerged as a critical limiting factor for modern capability."  What it does not then address is the energy requirement.  AI compute is power-hungry at a scale that current grid capacity and energy policy do not comfortably support.  The UK's AI ambition and its energy infrastructure are currently pulling against each other, and the two policies / ambitions are simply not compatible. Something will need to give.   

6. Defence needs to be a career people want

The DIP makes a genuine effort with pay rises, the Defence Housing Strategy, new Defence Technical Excellence Colleges and recruitment focus. There is also one telling provision buried in the Armed Forces Bill amendments which is the extension of "warlike preparations" as a reservist recall trigger and the lifting of the maximum recall age.  That is the DIP quietly conceding that the workforce plan cannot be met from the standing force at current retention rates.  

More widely, we wrote about the career attractiveness question this week, before the DIP rather inconveniently consumed all available airtime. The link is here https://heligangroup.com/blog/why-the-80m-defence-skills-investment-matters. The topic will still be relevant next month. 

One area that does not get enough airtime in these conversations is the intelligence and security community. These are not organisations that advertise their problems publicly, which is understandable, but the pace of technological change is creating a quiet crisis behind closed doors. 

7. The DFIS is a critical document that is yet to be published

The DFIS document is not yet published.  We await an announcement in summer 2027…

One line from the DIP is notable - the strategy "will set out how Government will work with private capital to help deliver its ambitions, strengthen sovereign capability, grow UK-based defence and dual-use businesses, create jobs, increase readiness and support growth across the nation."

That sentence is carrying a lot of weight as the DIP has committed to an objective. The DFIS has to answer the two questions that determine whether private capital actually turns up: what is the cost of capital and what are the return prospects?  If there is no return for private investors, there is no capital (unlike the public purse). If not credible, the gap between what the Treasury funded and what the SDR asked for becomes unattainable.

8. £1.7bn to "explore" a nuclear fuel cycle and the word choice matters

The DIP commits £1.7bn to "explore options for re-establishing a nuclear fuel cycle for defence reactor fuel."  The word explore is noteworthy as it is often the word used when seeking optionality on cancellation. 

AUKUS Pillar 1 requires Australia to operate a nuclear-powered submarine fleet fuelled with highly enriched uranium. The UK doesn't currently produce HEU at scale for defence use. Someone in the AUKUS chain has to and Australia won't. 

Hopefully this also results in domestic sovereignty of the whole nuclear supply chain (with the exception of extraction…!).  This could have much wider (positive) secondary impacts for the wider UK economy. 

9. "The best place to export from and grow a defence business in"

The DIP backs its ambition to make the UK "the best place to export from and the most attractive country in the world to grow a defence business in, with a defence sector that is more competitive, integrated, innovative and resilient."  Yes please.  More of that. One of the highlights of the DIP.

Worth noting what would have to be true for it to hold though.  Notably, an export-licence regime faster than the current.

10. SMEs waiting for the floodgates to open?

The Defence Office for Small Business Growth commits to a 50% increase in direct MOD spend with SMEs by 2028, an additional £2.5bn.  Many companies in the supply chain are waiting to see this materialise rather than remain a stated ambition...   Now that the DIP is announced hopefully the floodgates will open…

Worth noting that 50% sounds large but is off a historically low base as direct MOD SME spend has run at around 4% of total MOD procurement.

11. Novel technology spend is backloaded and four years into the future is multiple technology generations

AI, autonomy, cyber and space are the domains where allies and adversaries are committing multiples of what the UK is currently spending. These are also the areas where DIP funding is most heavily pushed into the future. This should be the other way round.

Catch-up from this will likely mean buying the mature foreign product as opposed to sovereign developed and owned.  The DIP has taken a soft approach here and could have been far more aggressive. 

The DIP is a serious document with money behind it.  Just nowhere near enough to meet the objectives of the SDR.  Now it is released we must look forward and work with what is available.  Our armed forces are world-leading, innovative and driven and have the full-support of industry.  Private capital will hopefully mobile quickly and fill the gap (and the opportunity) provided.