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The United Kingdom’s (UK) defence policy is undergoing a marked transformation. The publication of the Defence Industrial Strategy (DIS) in 2025 signals not simply a refresh of procurement priorities, but a recalibration of how the state views the relationship between national security, industrial capability, and market competition. At its core lies a renewed emphasis on sovereignty; on ensuring that critical defence capabilities can be developed, sustained, and scaled within a British-aligned industrial base.

This shift reflects a compelling strategic logic. Geopolitical instability, supply chain fragility, and the experience of recent conflicts have reinforced the importance of resilience and assured access to capability. The longstanding assumption that globalised supply chains can reliably deliver defence outputs at pace and scale has been tested and, in some cases, found wanting. Against this background, His Majesty’s (HM) Government’s ambition to strengthen the domestic industrial base is both understandable – and, in many respects, necessary.

At the same time, this is a policy direction that must be understood in context. The UK’s traditional procurement model was built not only on competition and value for money, but also (before Brexit) on participation in a broader European market characterised by cross-border supply chains and procurement integration. While the post-Brexit framework preserves competition as a core principle, it also affords Britain greater flexibility to prioritise domestic capability and resilience, albeit within the constraints of its international commitments.

The current framework, therefore, does not abandon competition, but increasingly qualifies its application. The result is a growing tension between two models: one anchored in competition and market discipline; the other in coordination, resilience, and strategic control.

From market mechanism to strategic instrument

The DIS makes clear that defence procurement is no longer viewed as a purely transactional market exercise. Instead, it is increasingly positioned (at least at a policy level) as a tool for shaping the industrial base in support of national security and economic growth.

HM Government envisages that investment decisions, partnership models, and supply chain structures will, over time, be used to deliver broader outcomes, including domestic capacity, technological leadership, and regional economic development. While some reforms are already underway, much of this agenda remains prospective, with implementation still evolving.

This marks a significant conceptual shift. If procurement is both a market function and an instrument of statecraft, tensions are inevitable. The critical question becomes not whether competition remains relevant (in legal terms, it clearly does), but how it is balanced in practice against wider policy objectives.

The logic of sovereignty: Prioritising resilience

‘Sovereignty’ in this context does not necessarily mean complete domestic ownership. Rather, it implies the ability to rely on certain capabilities in times of crisis, to expand production rapidly, and to insulate critical supply chains from external disruption. In practice, this is likely to involve a preference for suppliers that are either UK-based or drawn from closely aligned jurisdictions, reflecting both practical and political considerations – even if this hierarchy is not always formally codified.

Achieving these outcomes may require sustained investment, redundancy in capacity, and closer coordination between government and industry. These characteristics do not always align with competitive market dynamics, which tend to reward efficiency and lean operations. As such, the pursuit of sovereignty places pressure on the traditional assumptions of market-based governance, even if it does not displace them entirely.

The emergence of a coordinated model

There are increasing indications that HM Government intends to foster longer-term partnerships with key suppliers, providing greater certainty to support investment in capacity and innovation. These arrangements would mark a shift away from purely transactional procurement cycles towards more enduring relationships.

Alongside this, there are signs that certain capabilities are being identified as strategically critical. Where this occurs, firms may become central to their delivery. While this does not formally displace competition, it can, in practice, lead to a degree of concentration, with fewer suppliers playing a more significant and sustained role.

Consolidation reinforces this dynamic. Mergers and collaborations may be encouraged where they enhance scale, capacity, or interoperability. From a policy perspective, this may be seen as supporting resilience and capability. From a competition perspective, however, it may narrow the field of active competitors. The tension between these perspectives is likely to become more pronounced as the strategy develops.

Regulatory tension and the limits of the current framework

Competition law in Britain has not fundamentally changed, and it continues to apply in full to the defence sector. Firms cannot assume that collaboration encouraged by policy will be insulated from enforcement risk. Indeed, the experience of sector-specific relaxations during the Covid-19 pandemic illustrates that where flexibility is required, it is typically provided explicitly and temporarily.

This suggests that, if anything, constraint may operate in the opposite direction: competition law may limit the extent to which HM Government’s coordination objectives can be realised, absent further policy or legal intervention.

There is an additional external dimension. The UK’s international commitments, including under its trade arrangements with the European Union, continue to impose disciplines around competition and non-discrimination. While there is scope within those frameworks to pursue legitimate security objectives, an overt shift towards protectionist or exclusionary practices could give rise to challenge, particularly where it affects access for non-British suppliers.

The result is a more complex environment in which policy ambition and legal constraint must be reconciled. Without a clear articulation of how that balance is to be struck, businesses may face uncertainty in structuring transactions, partnerships, and collaborations.

Rethinking what ‘competition’ means in defence

Traditional metrics such as price, number of suppliers, and ease of entry remain relevant, but they are unlikely to be determinative in all cases. In a sector where continuity of supply and the ability to scale at pace are critical, additional performance measures are increasingly important.

This does not require abandoning competition as a principle. Rather, it suggests that competition may operate differently. In some cases, it may occur at the point of initial contract award, rather than persist continuously throughout the life of a programme. In others, it may coexist with elements of coordination and long-term alignment.

It is also necessary to distinguish more clearly between different segments of the defence sector. Highly sensitive or strategically critical capabilities may warrant greater coordination, while less critical areas may remain more open to conventional competition. The challenge lies in defining those boundaries in a way that is consistent, transparent, and legally robust.

A hybrid future for defence markets

The UK’s pursuit of defence sovereignty does not signal the end of competitive markets. However, it does point towards a more ‘hybrid’ model, in which competition coexists with a greater degree of strategic direction.

Crucially, this evolution is taking place within an unchanged legal framework. Competition law continues to apply, and there has been no general relaxation of the underlying rules. As a result, any shift towards coordination must operate within those constraints, unless and until they are expressly modified.

In practice, this is likely to result in a system in which competition continues to drive efficiency and innovation in parts of the market, while HM Government plays a more active role in shaping outcomes in areas of strategic importance.

Coherence as the central challenge

The central challenge for policymakers is therefore one of coherence. Britain’s defence industrial policy is evolving in response to genuine strategic pressures. Still, the legal and regulatory frameworks through which it is delivered have not shifted to the same extent.

Closing that gap will require clarity. Businesses need a predictable environment in which to invest and collaborate. Regulators need a clear basis for incorporating resilience and security considerations into their analysis. Policymakers must decide whether existing tools are sufficient or whether more explicit adjustments are required.

Competitive markets can survive the UK’s pursuit of defence sovereignty. However, they will do so in a modified form; shaped by strategic priorities, constrained by legal frameworks, and increasingly defined at the intersection of industrial policy and competition principles.

The task ahead is to ensure that this evolution is coherent. Without that, the risk is not the loss of competition, but the emergence of uncertainty at precisely the point where clarity is most needed.

Della Heptinstall is Defence Sector Lead at Walker Morris LLP and an Army Reservist. She advises businesses operating across the defence and security sector on strategic, regulatory, and commercial matters, with a particular focus on industrial capability, supply chain resilience, and national security.

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