LBS research in action: can defence R&D fuel UK economic growth?

The UK’s latest budget has brought a long-standing economic debate into sharp focus, putting London Business School research at the heart of national policy. Following years of advocacy from LBS alumnus Chris Coghlan MP, the government announced a new £5bn focus within the British Business Bank and the National Wealth Fund dedicated to defence, dual-use technology, and sovereign capability.

Coghlan, speaking in Parliament, welcomed the allocation as a critical step toward securing both national safety and long-term living standards, urging ministers to scale the initiative further through public-private partnerships and joint borrowing with international allies.

Yet, the strategic shift arrives amidst heavy scepticism from macroeconomists regarding the true multiplier effect of military spending. Critics point to data from Greenwich economists showing that traditional defence spending creates fewer jobs per million pounds than alternative investments like affordable housing or renewable energy. If the government achieves its military expansion by draining resource-rich sectors, the net impact on the wider economy could easily turn negative.

The deciding factor between growth and stagnation lies in the mechanics of how this capital is deployed. Analysts note that conventional spending heavily favours entrenched defence "primes," which rarely yields the dynamic productivity gains needed to kickstart an economy.

By contrast, channeling the new £5bn fund directly into R&D and early-stage tech startups, a framework strongly supported by the research of LBS Professor Paolo Surico, offers a much higher probability of creating civilian spin-offs and genuine innovation. Whether this multi-billion-pound gamble pays off depends on execution. With a massive £4.7bn gap in the current Defence Investment Plan being filled by shuffling existing capital budgets, and decisions on the broader 3 per cent GDP target delayed until next year’s Spending Review, the economic stakes remain incredibly high.

The true success of the policy will be measured by how effectively the British Business Bank can bypass legacy contractors and seed the agile tech companies driving the future economy.

Read the full analysis: The Long-Run Effects of Government Spending: https://l1nk.dev/vo9blqd

Wiping out the 2008 financial crash: A Defence R&D strategy to break Britain’s productivity stagnation: https://l1nq.com/sae2yl9

Chris Coghlan MP's speech in Parliament: https://acesse.one/ekdeyqc