From blast shields to laser optics: How defence funding is turning UK SMEs into frontline suppliers

As Small Business Saturday highlights the backbone of the UK economy, the Ministry of Defence is spotlighting a powerful undercurrent of innovation emerging from the small and medium enterprise (SME) sector. With £35 million in dedicated funding already distributed since July 2024, the Defence and Security Accelerator, operating under the newly established UK Defence Innovation organisation, is turning regional ingenuity into frontline capability.

The funding has enabled SMEs to take breakthrough concepts beyond the lab, moving them into real-world military deployment. These technologies range from advanced laser protection systems for infantry rifles to simulation tools reshaping medical response training. Importantly, many of these innovations are dual-use, finding commercial applicability in healthcare, transport, and telecom sectors while directly contributing to UK defence strength.

This surge in SME engagement is part of a broader vision articulated through the Strategic Defence Review. That blueprint included the launch of the UK Defence Innovation initiative and committed at least £400 million annually to commercial defence innovation, specifically targeting emerging technologies and regional talent pools.

What are the most promising examples of SME-led defence innovation across the UK?

Across the UK, case studies of successful SME-led defence innovation are rapidly accumulating. In Scotland, QuickBlock began as a civilian-focused modular building block system. With DASA’s support, it has been re-engineered for military use, now offering enhanced blast and ballistic protection on the battlefield. This product typifies the kind of flexible, mission-adaptable technologies that are becoming integral to UK defence logistics.

In Wales, a university spin-out from Swansea called Trauma Simulation has created high-fidelity training mannequins. These full-body models are helping both Combat Medics and Medical Emergency Response Teams simulate complex, life-saving interventions before deployment, improving the quality of care under battlefield conditions.

In the South West of England, Sentinel Photonics has become a notable example of a high-tech defence startup scaling with strategic support. Emerging from the Defence Science and Technology Laboratory ecosystem, the company grew from a founder-led team into a 20-employee defence optics firm. Its attachments for rifle scopes, which protect eyesight and evade laser detection, are now actively deployed with the KS1 rifles used by the British Armed Forces.

These examples show how DASA’s funding and guidance are not just promoting research but accelerating deployment timelines, converting experimental ideas into critical military tools while establishing commercial spinoffs in sectors like construction, medical training, and surveillance technology.

What is the mandate of UK Defence Innovation and how does it support SMEs?

UK Defence Innovation was launched under the latest Strategic Defence Review to consolidate the MOD’s investment strategy for frontier technology. With DASA serving as a key delivery arm, UKDI is responsible for identifying, funding, and scaling disruptive technologies across all four nations of the UK. Its structure is intentionally SME-friendly, with a strong regional focus that moves away from traditional London-centric procurement models.

Backed by a minimum ringfenced budget of £400 million annually, UKDI intends to channel at least 10 percent of the MOD’s total equipment procurement budget into novel and emerging technologies each year. By embedding this procurement goal into the overall defence industrial strategy, UKDI aims to achieve two simultaneous objectives: equip the Armed Forces with next-generation tools, and build economic resilience by developing regional innovation hubs.

Minister for Defence Readiness and Industry, Luke Pollard MP, noted that the government’s support is enabling small businesses to thrive while contributing to British national security. He stated that innovation is emerging from every part of the country, from advanced satellite systems developed in Oxford to structural defence solutions created in Scotland, demonstrating the cross-regional impact of the strategy.

What is the economic impact of the DASA-backed innovation ecosystem?

The economic contribution of this defence-SME partnership is now quantifiable. A 2025 report revealed that companies funded through DASA programmes have generated nearly £1 billion in value and created around 1,800 new jobs across the UK. Despite macroeconomic headwinds affecting private fundraising, these firms raised £174 million in 2024 alone, far outpacing wider tech-sector trends.

This success is attributed to the dual-use design approach of many funded technologies. By solving military problems with commercial scalability in mind, these startups are able to cross-pollinate innovation between sectors. As a result, medical products that began as military triage tools are now being piloted by civilian hospitals, while defence-focused sensors are finding applications in smart cities and autonomous vehicles.

These cross-sector linkages are fostering a robust pipeline of defence-aligned firms that are increasingly seen as investable by venture capital and institutional backers. The Ministry of Defence has responded by expanding access further through the newly created Defence Office for Small Business Growth. This office will streamline contracting pathways and aims to increase spending with SMEs by £2.5 billion by May 2028.

How is DASA reshaping regional innovation and supply chains?

One of the most defining features of the DASA-UKDI model is its regional equity strategy. By investing in SMEs based in industrial corridors, rural innovation clusters, and university towns, the Ministry of Defence is ensuring a broader distribution of defence procurement opportunities. This is a departure from the historic concentration of MOD contracts among large prime contractors and London-based suppliers.

Anita Friend, Head of DASA, noted that breakthrough innovations are emerging from every corner of the UK and that the agency is committed to identifying and nurturing them. She added that DASA’s role is to find and fund exploitable innovations quickly and effectively while ensuring UK prosperity.

This regional approach is not only widening the talent funnel into defence technology but is also building more resilient supply chains. By sourcing from geographically dispersed vendors, the MOD is reducing logistical risk while enhancing the overall diversity and resilience of its procurement base.

What does the future hold for defence-led innovation in the UK?

Looking ahead, analysts following UK defence policy believe that the DASA-UKDI model is establishing a replicable template for innovation-led industrial strategy. The annual budget commitments, SME procurement targets, and emphasis on dual-use design are already attracting attention from allied defence ministries and private investors alike.

With the UK now reaffirming its target to allocate 10 percent of its equipment budget to new technology, SMEs have a clearer path to relevance within the national security architecture. Meanwhile, innovation-friendly procurement and funding structures are likely to further accelerate technology translation cycles, helping smaller firms gain traction not just in defence but also in adjacent civilian markets.

Institutional investors and venture capitalists will be watching how many of these DASA-funded firms begin to scale commercially and whether they transition into global suppliers. As geopolitical tensions and supply chain dependencies continue to influence procurement decisions across NATO, the UK’s strategy of nurturing domestic innovation ecosystems could offer a compelling model for strategic autonomy through local entrepreneurship.

What are the key takeaways from the £35 million UK defence innovation funding for SMEs?

• The Ministry of Defence has channelled £35 million since July 2024 into small and medium-sized businesses to convert innovative ideas into deployable defence technologies.

• The funding is managed by the Defence and Security Accelerator (DASA) and now operates under the broader UK Defence Innovation (UKDI) initiative, backed by a ringfenced £400 million annual budget.

• Supported technologies include blast protection systems from QuickBlock, combat medic training mannequins from Trauma Simulation, and laser shielding optics from Sentinel Photonics.

• These innovations serve dual-use purposes, benefiting defence as well as sectors like healthcare, transport, construction, and telecommunications.

• DASA-backed firms have collectively generated nearly £1 billion in economic value and created 1,800 jobs across the UK.

• In 2024 alone, these firms raised £174 million in additional private capital, defying wider market slowdowns and strengthening supply chain independence.

• The MOD has also established the Defence Office for Small Business Growth, with a commitment to increase SME procurement by £2.5 billion by May 2028.

• The Strategic Defence Review mandates that 10% of MOD’s equipment budget be allocated to novel technologies each year.

• Innovation is being driven across all UK regions, from Oxford to Wales to the Scottish Highlands, highlighting a decentralised and inclusive approach to defence-led economic growth.

• UKDI’s regional investment strategy is reshaping national innovation supply chains, improving resilience and accelerating commercial deployment of frontier technologies.