Press Story

Joint purchasing and shared stockpiles could create up to £3.4bn of savings and fiscal headroom against current DIP
But reaching 3 per cent of GDP would require an extra £13 billion a year and wider tax and spending decisions, says IPPR
Stockpiling weapons and ammunition with European allies could create enough fiscal headroom to cover the remaining shortfall in the government’s Defence Investment Plan (DIP) several times over, new IPPR analysis finds.

The government’s DIP is only £0.9 billion underfunded in 2029/30, the year the fiscal rules bind – a rounding error against headroom of more than £20 billion.

Working with allies could make funding defence easier as joint procurement could cut the cost of equipment by around £0.9bn, while holding part of Britain’s munitions stockpile through a multinational institution could defer around £2.5bn of borrowing under the government’s fiscal rules.

Joint procurement would secure lower prices by combining orders and reducing duplication between European countries. For example, Europe currently operates around 178 major weapons systems, compared with approximately 30 in the United States. Coordinated purchasing could reduce equipment costs by up to 20 per cent.

Together, these measures could create up to £3.4bn in fiscal savings and additional headroom under the current DIP.

However, the findings come as ministers consider how to meet the much larger expense of increasing core defence spending to 3 per cent of GDP by 2030.

IPPR estimates that reaching 3 per cent would require approximately £13bn of additional annual spending in today’s prices. Joint procurement and stockpiling could make the increase more manageable, but shared stockpiles would only delay when some borrowing appeared under the fiscal rules. The government would still need to make difficult long-term borrowing, tax and spending decisions.

The authors argue that joining or working to establish a multinational defence bank can help support reindustrialization, by financing defence-related factories, supply chains, and manufacturing capacity.

IPPR says higher spending also risks feeding defence inflation, as opposed to maximizing defence capability unless Europe – including the UK - also expands the industrial capacity needed to produce weapons and ammunition. The cost of standard ammunition is now between 300 and 600 per cent higher than in 2021, eroding much of the value of recent spending increases.

In a defence bank, every £1 of paid-in capital could support between £5 and £8 of lending, helping the UK and its European allies build shared capabilities, strengthen industrial independence and reduce reliance on uncertain US security guarantees.

IPPR is urging the government to:

Expand the Multilateral Defence Mechanism, enabling the UK and its allies to purchase equipment jointly and hold shared stocks of weapons and ammunition.
Seek founding membership of the proposed Defence, Security and Resilience Bank – ideally brought together with the Multilateral Defence Mechanism in a single vehicle – helping British defence firms, particularly smaller companies, access affordable investment.
Publish a credible long-term funding plan for permanently higher defence spending.

William Ellis, senior economist at IPPR, said:

“Britain can afford its existing defence plan. The challenge is making sure every extra pound buys greater security, rather than simply pushing up prices. Buying equipment jointly with allies and building genuinely shared stockpiles could create up to £3.4 billion of additional room under the debt rule, while helping to expand the industrial capacity Britain needs.

“But cooperation cannot make defence free. Reaching 3 per cent of GDP by 2030 would still require around £13 billion more each year in today’s prices. The government will still have to make honest choices about tax, spending and borrowing.

“The best outcome would be to bring the UK’s plans and the Canada-led defence bank together under one roof, spanning Britain, Europe and Canada. If that can’t happen quickly, Britain should join the bank as a founding member and help shape its rules from the start, while pressing ahead with joint procurement and shared stockpiling. Britain will get less for its money if it continues buying alone.”

Laura Chappell, associate director at IPPR, said:

“Andy Burnham has a real opportunity as he looks to improve Britain’s defence spending.

“Working with allies, including in Europe and Canada, not only offers the opportunity to procure more efficiently and support reindustrialisation, but it helps us to build the defence alliances we need for the future.

“The UK needs to rely less on US security guarantees. Planning, procuring, and building defence industrial capability with non-US partners can help support this strategic shift.”

ENDS

William Ellis is available for interview

CONTACT

Liam Evans, head of news and media: 07419 365 334 l.evans@ippr.org

David Wastell, director of news and communications: 07921 403651 d.wastell@ippr.org

NOTES TO EDITORS

Advance copies of the report are available under embargo on request
Methodology: Figures are from IPPR modelling on the OBR's March 2026 forecast and the published Defence Investment Plan (30 June 2026). All fiscal-rule effects are measured in 2029/30, the year the rules bind; “today's prices” means 2025/26, using the OBR's GDP deflator. The ‘up-to’ £3.4 billion figure combines two effects of buying through a multilateral mechanism: around £2.5 billion of deferred borrowing from stockpiling Britain's £11.1 billion munitions programme, and around £0.9 billion of potential savings from jointly purchased equipment, net of interest on a £1 billion paid-in stake. The stockpiling treatment requires the multinational mechanism to own the stocks outright, with the UK paying only when they are drawn down. The figure rises to around £4.5 billion if defence spending reaches 3 per cent of GDP by 2029/30. Reaching 3 per cent would itself cost around £13 billion a year in today's prices. Procurement-savings estimates are from the European Parliamentary Research Service; weapons-system counts from the Draghi report; the £1-into-£5–8 lending ratio from the DSRB. That ratio is indicative, applies across the Bank’s portfolio and does not guarantee an equivalent amount of finance for the UK. Further detail is available on request.
IPPR (the Institute for Public Policy Research) is the UK’s most influential think tank, with alumni in Downing Street, the cabinet and parliament. We are the practical ideas factory behind many of the current government’s flagship policies, including changes to fiscal rules, the creation of a National Wealth Fund, GB Energy, devolution, and reforms to the NHS. As an independent charity working towards a fairer, greener, and more prosperous society, we have spent almost 40 years creating tangible progressive change - turning bold ideas into common sense realities. www.ippr.org