White & Case: 97% of UK Defence Firms to Raise Funding

According to research from global law firm White & Case, 97% of UK defence companies and defence technology start-ups surveyed are likely to raise significant external funding over the next 12 months to accelerate growth and meet growing demand for defence technologies.

Companies are considering blended finance options, with 49% of businesses looking to raise equity finance in the next year, 47% debt finance and 39% government grants.

Defence technology start-ups are more likely to target equity than established defence companies, given how many are still developing products, making debt less suitable at this stage. 

Meanwhile, more established companies are more likely to target debt, particularly if they have already secured major government contracts.
Among businesses seeking equity finance, government-backed investors are seen as the most attractive source at 37%, narrowly followed by corporate venture investors (36%), strategic corporate investors (34%) and private equity firms (34%). 

Venture capital investors (30%), family offices (20%) and sovereign wealth funds (12%) further emphasise the range of potential funding sources.

Defence technology as an attractive investment opportunity

With increasing government budgets, contract visibility, recurring revenues and high barriers to entry, the defence sector has become attractive to investors.
The investment case extends beyond current conflicts alone. 

Heightened geopolitical tensions have accelerated the drive to enhance resilience, with governments prioritising onshoring and developing sovereign capabilities to reduce reliance on other countries, creating longer-term demand for new technologies. 

Additionally, technologies initially intended for military use could potentially be used for future civilian applications across larger markets.

Discussing the research, Daniel Turgel, Partner and Co-head of White & Case’s Global Technology Industry Group, says: “With global military expenditure soaring, defence firms are looking to scale rapidly to meet growing demand for the latest defence technologies.”

However, scaling defence technology start-ups is an expensive business and – given their significant capital requirements and high cash burn rates – many earlier-stage firms are likely to undertake successive funding rounds to ensure they have sufficient runway to support growth.

He adds that for the most promising businesses, there is no lack of equity financing.

“A wall of private capital is looking for a home in defence technology as previous investment restrictions are relaxed and investors rush to gain exposure to a highly attractive sector,” Daniel says.

UK investors lead as private capital targets defence technology

Building on Daniel’s comments, Tom Clarke, Partner at White & Case, adds: “While there has been a marked increase in interest among overseas investors, it is no surprise that UK investors remain, for now, the predominant source of expected capital for these companies, with the number of businesses expecting investment from UK sources alone outstripping investment from APAC, the US and the Middle East combined.” 

He adds that the UK’s strengths in matching capital with investments are underpinned by “a mature VC ecosystem”, with private capital and access to global money markets.

Daniel says: “The UK’s private markets already have a strong track record of generating more fintech unicorns than any country outside the United States, and are now poised to repeat that success in defence technology.

“The UK could potentially see significant fundraising announcements over the next 12 months, making this an exciting sector to watch.”

White & Case’s key partners:

Air France–KLM: A leading global airline alliance partnering with the firm for extensive cross-border corporate mergers, financing, and regulatory compliance advisory.
CEO: Benjamin Smith | Headquarters: Paris, France

ABB: Global electrification and automation leader relying on the firm for cross-border transactions, intellectual property strategy, and international corporate matters.
CEO: Morten Wierod | Headquarters: Zurich, Switzerland

Engie: Multinational utility powerhouse partnering with the firm for large-scale energy transition infrastructure deals, project finance, and regulatory litigation.
CEO: Catherine MacGregor | Headquarters: Courbevoie, France