AI and drones at the heart of defence plans, Rachel Reeves reveals

Chancellor Rachel Reeves has confirmed at least 10 per cent of the defence equipment budget will go to “novel technologies”.

Delivering her spring statement, Reeves said artificial intelligence (AI), autonomous systems and drones will be at the forefront of her plans to go “further and faster” on defence.

In her speech, Reeves pointed to Glasgow, Derby and Newport as the advanced manufacturing production hubs expected to benefit from the increase in defence technology spending.

She said it will create “demand for highly skilled engineers and scientists” and deliver “new business opportunities for UK tech firms and start ups”.

She also announced a new body, UK Defence Innovation (UKDI), which will aim to deliver “innovative technology to the front line at speed”. Allocated an initial budget of £400m, UKDI is expected to launch in July.

Reeves said: “We will reform our broken defence procurement system, making it quicker, more agile and more streamlined and giving small businesses across the UK better access to Ministry of Defence (MOD) contracts.”

The chancellor confirmed £3.25bn will be dedicated to public sector reform via a new Transformation Fund. The first round of funding is worth £225m with £8m allocated to new technology for probation officers, and £42m for three “pioneering frontier AI exemplars”.

The remaining funds will be invested in the fostering system and in voluntary exist schemes for the civil service.

She also confirmed one in 10 civil servants will be digital professionals by 2030. This announcement comes after Prime Minister Keir Starmer announced a major AI driven revamp to the civil service earlier in the year. Starmer said the changes would bring £45bn in savings and were likely to bring down the headcount across the civil service. 

ScotlandIS chief executive Karen Meechan said it brings “mixed news” for the Scottish tech sector.

She said: “While I didn’t anticipate any tax rises, the ongoing freeze on tax thresholds continues to place a strain on our tech sector. It remains a persistent challenge for our businesses, and those already navigating tough conditions will continue to feel the pressure.”

However, she welcomed the boost in the MOD’s budget, and it’s selection of Glasgow as one of the regions set to benefit from advanced manufacturing projects.

She continued: “AI is already a huge area of growth for us in Scotland and this investment will only create more opportunities for business growth and skilled job creation not only in the area but across the entire country.”