Defence firms held back by UK ethical banking standards, industry says |

British banks should abandon outdated ethical standards and increase lending to domestic defence manufacturers in a “patriotic” effort to ensure the UK can meet its security needs, defence suppliers have told Sky News.

The defence industry has long complained that environment, sustainability and governance (ESG) standards, intended to guide business impact on society, have prevented small and medium-sized companies (SMEs) raising finance.

With the government promising to increase defence spending to 2.5% of GDP, and the chancellor keen that SMEs in the sector should contribute increased growth, the industry believes ESG rules could hold British companies back.

Lizzie Jones of Supacat, which manufactures military vehicles used by special forces and infantry, told Sky News: “We have absolutely felt the disinterest from banks to invest in the defence industry, which has been really hard to deal with over the last few years.

“We’re hoping that the tide is beginning to change, and that actually some of the patriotic feelings that we need the defence industry, particularly right now, will help persuade the banks that investing in defence industries is good for UK growth.”

The call for support from the defence industry comes as European military chiefs meet in London to discuss operational aspects of a proposed peacekeeping force in Ukraine.

Donald Trump’s return to the White House, and his demand that European NATO partners scale up defence and lead any security guarantees for Ukraine, has forced a re-examination of defence priorities.

Rachel Reeves has sought to link increased spending to her growth agenda, and defence will form part of the industrial strategy due later this year.

Earlier this month a group of Labour MPs, and members of the defence select committee, called on banks to end “anti-defence” ESG guidelines in light of the US retreat from European security, and the need to increase support for Ukraine.

Improved access to finance is one of several demands from defence suppliers large and small, as the industry prepares for increased demand.

Certainty of contracts, a reduction in Ministry of Defence red tape, and access to cheap energy, skilled workers and critical minerals are all also required if the UK is to…