Business

Elon Musk has never been one for convention, and his plans for the SpaceX initial public offering are no exception.

The aerospace-to-artificial intelligence conglomerate is preparing to court retail investors on an unprecedented scale as it targets a valuation of $2tn (£1.5tn) in what would be the largest stock market flotation ever attempted.

In a move that harks back to the great British privatisations of the 1980s, SpaceX has earmarked up to 30 per cent of its shares for non-professional investors rather than reserving the bulk of the offering for the City institutions and Wall Street heavyweights that typically dominate such deals. The company is banking on Musk’s devoted following to help it raise $75bn (£56bn) when it lists later this year.

Details of a summer roadshow emerged this week after SpaceX briefed the 21 banks retained to manage the deal. Analysts from the underwriting syndicate will receive their first formal briefing on 7 June, followed four days later by an event for 1,500 retail investors at a venue yet to be disclosed. Shares will also be offered to investors in the UK, the EU, Australia, Canada, Japan and South Korea.

Bret Johnsen, SpaceX’s chief financial officer, is understood to have told the banks that retail participation would be larger than in any previous IPO, describing the company’s individual supporters as people who have been “incredibly supportive of us and of Elon for a long time”. The approach echoes the way Margaret Thatcher’s government sold British Telecom shares directly to ordinary savers in 1984, giving millions their first taste of share ownership.

Industry observers have compared the excitement surrounding the listing to the frenzy that accompanied Google’s debut in 2004. The company’s implied valuation has climbed sharply in recent months, rising from $1.25tn when SpaceX merged with Musk’s artificial intelligence venture xAI in February to $1.75tn a month ago and now $2tn according to Bloomberg.

Whether that figure can be justified remains a matter of heated debate. George Ferguson, a senior analyst at Bloomberg Intelligence, noted that the only publicly available financial data is top-line revenue, making a precise valuation difficult. He forecast revenues of $20bn for SpaceX this year but cautioned that xAI, which accounts for just $1bn of that figure, is “a laggard in the AI race right now” and represents a significant portion of the overall valuation.

SpaceX generated between $15bn and $16bn in revenue last year, with the satellite broadband service Starlink and US government defence and space contracts providing the lion’s share. A full prospectus is expected in late May, at which point investors will get their first detailed look at the company’s profitability.

Morgan Stanley, Bank of America, Citigroup, JP Morgan and Goldman Sachs are leading the fundraising, underscoring the sheer scale of the transaction.

Perhaps the most intriguing element of the investment case is Musk’s pivot from his long-held ambition of colonising Mars to a newer, arguably more commercial vision: datacentres in space. Proponents argue that orbiting facilities powered by a constant supply of solar energy could solve some of the terrestrial power constraints bedevilling the AI industry.

The concept remains untested, however, and the technological hurdles are formidable. Solar radiation, space debris and the sheer difficulty of transporting and assembling datacentre components in orbit all present challenges that would likely require advanced robotic systems not yet in existence. SpaceX’s new Starship rocket, billed as the world’s most powerful launch vehicle, is central to the plan, though a test launch scheduled for this week has been pushed back to mid-May.

Ferguson struck a cautious note. The further away space-based datacentres are from commercial reality, he suggested, the more the concept becomes a drag on valuation rather than a driver of it.

For UK investors tempted by the hype, the message is clear: this will be an IPO unlike anything seen before, but the gap between Musk’s soaring ambitions and proven financial performance remains considerable. As with all things Musk, the potential rewards are vast, but so too are the risks.

Read more:
SpaceX woos the small investor as Musk eyes the biggest flotation in stock market history

Britain’s standing as a global climate leader faces a critical test as senior figures in international diplomacy have warned that any move to open new oil and gas fields in the North Sea would deal a severe blow to worldwide efforts to cut greenhouse gas emissions.

The government is facing mounting pressure from the oil industry, the Conservative opposition, Reform UK, certain trade unions and factions within the Treasury to grant new drilling licences. This comes despite research showing that the two largest remaining fields, Rosebank and Jackdaw, would displace just 1% and 2% respectively of the UK’s gas imports, offering negligible benefit to either prices or energy security.

The North Sea basin is now more than 90% depleted, and extracting its remaining pockets of hydrocarbons is becoming progressively more costly and energy-intensive. Yet the political appetite for new licensing persists, placing Ed Miliband, the energy security and net zero secretary, in an increasingly uncomfortable position.

Nicolas Stern, professor at the London School of Economics, cautioned that fresh drilling would be damaging on multiple fronts, bad for growth, bad for energy security and a harmful signal to the international community. Lord Stern pointed to Britain’s track record as the first G7 nation to commit to net zero by 2050 and its influential climate legislation, arguing that the world pays close attention when the UK changes course.

The backlash from the developing world has been particularly fierce. A senior African negotiator, speaking anonymously, said the continent would reject any UK expansion of oil drilling, describing it as fundamentally at odds with the Paris agreement. Mohamed Adow, director of the Nairobi-based Power Shift Africa thinktank, warned that approval of new projects would signal that short-term interests were being placed above long-term responsibility, setting a precedent that could prove impossible to contain.

The timing is especially sensitive. Britain has been one of the principal supporters of a global conference on fossil fuel transition taking place in Colombia later this month. However, Miliband will not attend, with climate envoy Rachel Kyte going in his place, a decision likely to disappoint campaigners who credited the energy secretary with brokering a last-minute deal at the Cop30 summit in Brazil last November.

Christiana Figueres, former executive secretary of the UN framework convention on climate change, acknowledged the geopolitical pressures driving the energy security debate but argued that expanding drilling risked locking in infrastructure that was increasingly out of step with the direction of the global energy system. True energy independence, she suggested, lay in scaling up clean domestic energy rather than prolonging the life of declining industries.

The strategic concern for Britain’s business community is clear. Many developing nations are weighing whether to exploit their own fossil fuel reserves rather than invest in renewables. If they choose the former path, the world would far exceed the carbon limits scientists say are necessary to avert the worst consequences of climate breakdown. A senior development official put the matter bluntly: developing countries are already asking why they should forgo their own resources if the UK will not do the same.

An ally of Miliband defended the government’s position, describing the decision to halt new exploration licences as a landmark stance for a major oil and gas producing nation. A government spokesperson confirmed that clean energy and climate action remained at the heart of the agenda, including what it called a world-leading commitment to stop issuing licences for new fields.

Whether that commitment holds in the face of political and industrial pressure will be one of the defining questions of Britain’s energy policy in the months ahead.

Read more:
New North Sea oil fields would “send a shock wave around the world”, climate experts warn

A former Chief Design Officer at Prequel, who led its photo and video apps to repeated No. 1 rankings in the App Store’s Photo & Video category, on why manual design is losing value.

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How Aleksandr Loginov Is Redefining Design in the Age of AI

Petrol prices across the United Kingdom have climbed to an average of 154.65p per litre, marking the highest level since October 2023 and representing a rise of nearly 20p since the outbreak of hostilities with Iran six weeks ago.

Diesel, meanwhile, has reached 186.75p per litre on average, a level not seen since November 2022, with some motorists reporting prices in excess of £2 per litre at individual forecourts.

The surge, which amounts to a rise of more than 17 per cent since the conflict began, has been driven largely by disruption to global supply routes, particularly through the Strait of Hormuz, a critical chokepoint for international oil shipments. In the United States, average petrol prices have jumped more than 20 per cent over the past month alone, from $3.45 to $4.16 per gallon, adding to the political pressures facing President Donald Trump ahead of November’s mid-term elections.

However, there was a measure of relief for markets on Wednesday following news of a 14-day ceasefire agreement between Washington and Tehran. Brent crude fell sharply in response, dropping roughly 13 per cent to approximately $95 (£71) per barrel.

Despite the positive signals from the ceasefire, industry experts have cautioned that relief at the pumps is unlikely to arrive quickly. Prem Raja, head of the trading floor at Currencies 4 You, noted that petrol prices typically lag behind movements in crude oil, meaning the recent drop in wholesale costs will take time to filter through to forecourts.

Raja suggested that prices are likely near or at their peak, provided the ceasefire holds, but warned that the descent would be gradual. He pointed to the disruption in flows through the Strait of Hormuz as a factor that could keep prices elevated in the near term, and urged drivers to shop around for better deals, particularly by avoiding motorway service stations in favour of local forecourts.

Tony Redondo, founder of Newquay-based Cosmos Currency Exchange, described the dynamic as a classic example of the so-called “rocket and feather” effect, where prices rise rapidly but fall far more slowly. He indicated that petrol could remain above 145p per litre through the summer, even if wholesale costs stabilise, with the risk premium on Middle Eastern supply routes continuing to weigh on the market.

Redondo also flagged the scheduled tapering of the government’s 5p fuel duty cut from September 2026 as a further headwind for drivers, potentially offsetting any benefit from falling global oil prices. In the meantime, he advised motorists to favour supermarket forecourts, which on average charge 4.4p per litre less than branded stations.

Antonia Medlicott, founder and managing director of London-based Investing Insiders, struck a cautious note, arguing that the price spike reflects the market pricing in risk rather than an immediate supply shortage. She suggested that stabilisation could come sooner than previously anticipated, provided there is no further escalation, but warned against expecting swift relief at the pumps.

Medlicott emphasised the broader concern for household finances, noting that while individual price spikes may prove temporary, the cumulative impact of repeated shocks on everyday living costs can be both significant and enduring.

Perhaps the starkest warning came from Samuel Mather-Holgate, managing director and independent financial adviser at Swindon-based Mather and Murray Financial, who argued that petrol prices are likely to remain elevated for some time. He pointed to the continued involvement of Israel in the wider regional tensions as a source of ongoing market uncertainty, suggesting that a lasting peace may still be some distance away.

Mather-Holgate cautioned that despite the ceasefire, volatility in oil markets would persist, and did not rule out the possibility of fuel reaching £2 per litre even with peace talks on the horizon. His assessment serves as a reminder that for British motorists, the road back to cheaper fuel may be a long one.

Read more:
UK petrol prices approach 155p a litre as Iran conflict drives fuel costs to highest level in over two years

Teaching is full-time work, and carving out time for a graduate degree on top of lesson planning and grading takes real commitment.

That’s why many educators turn to 1 year online master’s in education programs: you stay in your classroom, finish in around 12 months, and come away with a recognized qualification. According to UPCEA, 71% of prospective graduate students now prefer fully online programs, and that shift shows clearly in education.

Here are four programs worth looking at.

1. International Teachers University (ITU): Best for International Educators

ITU built its 1 year online master’s in education programs on international teaching benchmarks, which makes it particularly relevant for teachers who work across different curricula or in international school settings.

The program includes eight core pedagogy courses and two specialization courses. You’ll study learning theories and assessment methods that track student progress in real time, alongside questioning techniques that develop critical thinking. Technology integration runs through the core curriculum with a focus on practical classroom application. Specialization tracks cover Early Years and Primary Education, English Language and Literacy, and Teaching Mathematics and Numeracy. The full program costs $7,500, with no additional fees.

2. Walden University: Best for Flexible Scheduling

Walden is one of the more established names in online M Ed programs, with specializations in Teacher Leadership and Curriculum, Instruction, and Assessment that work well for practicing educators. Courses run on seven to eight-week terms, which keeps the workload manageable alongside a full teaching schedule. The university holds regional accreditation and wide recognition across U.S. school districts.

3. Western Governors University (WGU): Best for Experienced Teachers

WGU runs on a competency-based model, where progress is tied to demonstrated mastery. Experienced teachers with strong subject knowledge can often move through the program faster than a fixed-semester schedule allows. WGU’s online masters of education degree carries CAEP accreditation, which employers across the U.S. and in many international schools recognize.

4. Grand Canyon University (GCU): Best for Rolling Intake

GCU offers online M Ed programs with multiple start dates throughout the year, which helps if waiting for a traditional intake doesn’t fit your schedule. Specializations cover educational technology, special education, and teaching and learning. The curriculum leans toward applied learning, with coursework connected directly to classroom practice.

How to Pick the Right 1 Year Online Master’s in Education Program

Before committing, check two things above all: whether the institution holds proper accreditation and whether the curriculum matches the kind of teaching you actually do. Scheduling flexibility matters too, especially if your school runs on a strict term calendar.

An online masters of education degree becomes a worthwhile investment when it points toward something specific, whether that’s a leadership role, a new school environment, or a qualification threshold you need to meet.

Frequently Asked Questions

What is a 1-year online master’s in education program?

It’s an accelerated graduate degree in education completed online in around 12 months. It covers pedagogy, curriculum design, and educational leadership, giving working teachers a path to advanced qualifications without leaving their jobs.

Who should consider a 1-year online master’s in education program?

Any working teacher who wants to advance professionally without a career break. These programs work well for educators moving into leadership, refining classroom practice, or meeting qualification requirements for international or independent school positions.

What specializations are commonly offered in 1-year online master’s in education programs?

Common specializations include curriculum and instruction, educational leadership, early years education, educational technology, and English language teaching. What’s available varies by institution, so check each program’s course catalog before applying.

How do I choose the right 1-year online master’s in education program?

Start with accreditation, then look at how well the curriculum fits your teaching context and how flexible the scheduling is. For teachers in international settings, programs built on global standards tend to be more useful than those tied to a single national curriculum.

Are 1-year online master’s in education programs recognized by employers?

Yes, provided the institution holds proper accreditation. Most schools, districts, and international organizations recognize degrees from accredited universities. If you plan to teach abroad, confirm that recognition applies in your target country before enrolling.

Read more:
One Year Online Master’s in Education Programs: 4 Top Options to Consider

A workplace pension provider founded by two cousins has secured £500,000 in funding as it sets out to overhaul a market where the vast majority of employers say they are dissatisfied with their existing arrangements.

Compound, which targets growing businesses with a digitally native pension platform, closed the round with participation from Fuel Ventures and Paul Rippon, co-founder of the digital bank Monzo, who joins as a special adviser.

The timing looks shrewd. Workplace pension contributions across Britain are forecast to reach £480 billion by 2033, yet the sector remains dogged by outdated technology and disengaged savers. Some £50 billion in pension pots have already been lost track of entirely, whilst opt-out rates nationally sit at around ten per cent, climbing to fifteen per cent among millennials and seventeen per cent for Generation Z.

Auto-enrolment has succeeded in bringing millions of workers into pension saving since its introduction, but critics argue that poor user experience and impenetrable jargon mean many employees fail to grasp the tax advantages and long-term growth on offer. Research suggests that ninety-four per cent of companies encounter problems with their pension provider, a statistic that Compound’s founders believe represents a significant commercial opening.

The company, founded by Dan and Richard Klin, has built a platform that integrates directly with accounting and payroll software to reduce the administrative burden on employers. Alongside the business-facing product, Compound offers employees a mobile application with tools to find and consolidate old pension pots, a feature designed to tackle the lost pensions problem head-on.

Early results appear encouraging. Compound reports an employee opt-out rate of just 1.6 per cent, comfortably below the national average and a figure its founders attribute to removing friction from the process.

Richard Klin said the company was built to address what he describes as a fundamentally broken system. He argues that most people who opt out of workplace pensions are not rejecting the concept of saving but rather walking away from platforms they find confusing and untrustworthy.

Dan Klin, meanwhile, is keen to challenge perceptions of pensions as dull. He positions them as among the most powerful wealth-building tools available to ordinary workers, provided the administration is simplified and the engagement improved.

Mark Pearson, managing partner of Fuel Ventures, pointed to the scale of the problem that incumbents such as NEST have struggled to resolve, describing Compound’s product-led approach and sector expertise as well suited to disrupting the space.

Whether Compound can translate a promising pilot into meaningful market share remains to be seen. The workplace pension sector is dominated by large, entrenched players with significant distribution advantages. But with financial anxiety running high across the country and a generation of younger workers demonstrably disengaged from retirement saving, the appetite for a credible challenger has arguably never been greater.

Read more:
Monzo co-founder backs pension start-up Compound in £500,000 raise to shake up workplace savings

Changes to the off-payroll working rules coming into force this month will relieve scaling businesses of costly compliance obligations. Yet contractors who fail to adjust their rates risk being caught out, writes Business Matters.

From this month, a raft of amendments to the UK’s IR35 tax legislation will redraw the lines of responsibility between businesses and the freelancers they engage. For thousands of companies that have until now shouldered the burden of determining whether their contractors fall inside or outside the off-payroll working rules, the changes promise welcome relief. For freelancers, however, the picture is rather more complicated.

IR35, in essence, is the government’s mechanism for ensuring that individuals who work through intermediaries such as personal service companies, but whose engagements resemble those of employees, pay a broadly equivalent amount of income tax and National Insurance. According to HMRC, the framework has already shifted more than 130,000 workers into deemed employment tax status since 2021 – a figure that underscores both its reach and its continuing impact on the UK’s contracting workforce.

Under the current regime, responsibility for determining a contractor’s IR35 status rests largely with the hiring organisation – provided that organisation qualifies as medium or large under company law. Smaller companies have been exempt, with the onus falling instead on the contractor’s own personal service company. The April 2026 changes significantly raise the bar for what constitutes a “small” company, meaning many more businesses will now fall beneath that threshold and be freed from compliance duties.

A wider net for the small company exemption

Previously, a company qualified as small if it met at least two of three criteria: annual turnover of no more than £10.2 million, a balance sheet total of no more than £5.1 million, and no more than 50 employees. From April 2026, the turnover ceiling rises to £15 million and the balance sheet limit to £7.5 million, whilst the headcount threshold remains unchanged at 50 staff. The consequence is that a significant number of businesses that were previously classified as medium-sized will now be treated as small, and the obligation to issue a Status Determination Statement – the legal document setting out whether a contractor sits inside or outside IR35 – will pass back to the contractor.

Vincent Huguet, chief executive and co-founder of Malt, the European freelance talent platform, welcomes the reforms but sounds a note of caution. The shift in thresholds, he says, helps to move responsibility away from hiring managers, allowing them to concentrate on when and what they need rather than worrying about the tax implications of every engagement. Yet he warns that neither companies nor freelancers should become complacent.

The end of double taxation?

Alongside the threshold changes, the government is introducing a PAYE set-off mechanism designed to address one of the more contentious aspects of the existing rules. Until now, where a client failed to apply IR35 correctly, HMRC could pursue the full PAYE and National Insurance bill from the deemed employer without accounting for tax already paid at the contractor’s end through their personal service company. The new mechanism allows HMRC to offset those prior payments when calculating any outstanding liability.

Huguet describes this as an important step towards eliminating double taxation, noting that it removes the risk of a freelancer ending up paying more than their fair share and properly accounts for historic tax records.

Pricing: the freelancer’s blind spot

For contractors, however, the real sting may lie in the detail of their own rate cards. With a greater share of compliance responsibility now resting with them, freelancers must ensure their pricing properly reflects the full cost of engagement. Last year’s increase in employer National Insurance Contributions from 13.8 per cent to 15 per cent, coupled with the reduction in the payment threshold from £9,100 to £5,000 annually, has already made hiring more expensive. Because employer NIC is deducted from the assignment rate before a contractor’s pay is calculated, those costs feed directly into negotiations – whether the contractor is deemed inside or outside IR35.

Huguet’s message to freelancers is blunt: get your pricing right. Those who fail to factor in these shifting obligations risk undervaluing their services at precisely the moment when the regulatory landscape demands they take greater ownership of their tax affairs. For businesses, particularly those that find themselves newly reclassified as small, the changes offer a chance to engage freelance talent with less red tape – but only if both sides of the arrangement understand what is now expected of them.

Read more:
Thousands of growing firms freed from IR35 burden – but freelancers warned not to underprice

The government has announced a £100million package of measures aimed at unlocking private investment for Britain’s entrepreneurs, start-ups and scale-ups, but business leaders have rounded on the plans, warning that established small firms are being forgotten while the broader strategy for enterprise remains “in a muddle.”

Brought into force at the start of the new tax year, the changes expand eligibility for the Enterprise Management Incentives scheme, which allows qualifying companies to offer employees tax-advantaged share options. The package also doubles the amount a company can raise through the Enterprise Investment Scheme and Venture Capital Trusts, both of which offer tax reliefs designed to channel capital towards higher-risk, early-stage businesses that struggle to secure growth funding.

Rachel Reeves, the Chancellor, said she was “backing business with a more active state” and making “big commitments to industry,” adding that the measures would help wealth creators access the finance critical to their success.

The reception from the business community, however, was notably cool. Critics pointed to the stark contrast between the sums involved and the £25billion a year the Treasury is now raising from employers following its increase to National Insurance contributions.

Katrina Young, a digital transformation strategist at KYC Digital, said the arithmetic does not flatter the policy. The expanded EIS, VCT and EMI reliefs are targeted at companies with gross assets of up to £120million and as many as 500 employees, she noted, leaving out the dental practices, family logistics firms and small bakery chains that employ the bulk of the workforce yet face an additional £900 per employee per year since the NI threshold was cut from £9,100 to £5,000. She pointed to British Chambers of Commerce data showing that 82 per cent of firms expect the NI rise to affect their business, with 58 per cent anticipating reduced recruitment.

The hospitality sector offered a particularly blunt assessment. Jess Magill, co-founder of Devon-based Powderkeg Brewery, said there is little point in throwing money at getting new companies off the ground if they are then taxed out of existence. She argued that what is needed is support for established businesses to survive, warning that popular venues are closing every week and the domino effect on suppliers is worsening.

Colette Mason, an author and AI consultant at London-based Clever Clogs AI, echoed those concerns, describing the £100million as “miserly” when set against the NI rises. She noted that the EMI expansion targets roughly 1,800 scale-up companies over five years, firms already attractive to investors, while the businesses that employ most people are cutting hours, freezing wages and reconsidering whether to hire at all.

Samuel Mather-Holgate, managing director of Swindon-based Mather and Murray Financial, said the government is sending mixed signals at precisely the wrong moment, increasing the amount companies can raise while simultaneously slashing the benefits for investors in those same businesses. The UK, he argued, needs to be incentivising companies both to start and to stay on British soil.

The announcement is likely to intensify the debate over whether the government’s growth agenda is reaching the businesses that need it most, or merely recycling a fraction of what it has already taken.

Read more:
Government’s £100m pledge for innovators dismissed as a drop in the ocean after £25bn National Insurance raid

Kate Alessi, Google’s managing director for the UK and Ireland, has pushed back firmly against warnings that artificial intelligence will trigger widespread unemployment, insisting that the greater risk lies in failing to equip workers with the skills to thrive alongside the technology.

Speaking as Google unveiled a new national upskilling programme backed by £2 million in grant funding from Google.org, Alessi argued that history offered a reassuring precedent. Every previous wave of technological disruption, she noted, had prompted the same anxieties about disappearing jobs – and every time, the fears had proved overblown as new roles emerged to replace the old.

Her intervention comes at a pointed moment. In January, the Mayor of London, Sadiq Khan, cautioned that AI could bring about a new era of mass unemployment without proper oversight, while Bank of England governor Andrew Bailey drew comparisons with the Industrial Revolution, stressing the need for retraining and education on a significant scale.

Alessi does not deny that change is coming, but she frames it rather differently. Citing research from the policy consultancy Public First, she pointed out that roughly six in ten UK jobs are expected to be enhanced rather than eliminated by AI. The challenge, she maintained, is ensuring that people are prepared to step into the roles the technology creates, not simply bracing for the ones it displaces.

The figures suggest there is considerable ground to make up. According to new research commissioned by Google, although nearly two thirds of the UK population have tried AI tools, just one in ten consider themselves advanced users. Only a quarter felt they were deploying AI in ways that saved them meaningful time or gave them genuinely new capabilities.

“Most people are really only scratching the surface,” Alessi said.

To address that gap, Google is rolling out a series of practical initiatives. Alongside the grant funding, the company plans to run Gemini tours across universities, aimed at ensuring graduates enter the workplace with a working knowledge of AI. It will also stage a series of pop-up events branded as “squeeze the juice” bars in towns and cities around the country, designed to show ordinary users how to move beyond basic prompting to tackle more complex tasks – from automating routine admin to conducting in-depth research.

Read more:
Don’t fear AI job losses – invest in training, urges Google’s UK boss

Increased defence investment stands to deliver a significant windfall for the British economy, with new analysis suggesting that the government’s ambitious spending commitments could add £30 billion a year to national output within two decades.

Research by EY, the professional services giant, has found that raising defence expenditure from its current level of 2.5 per cent of GDP to between 3.5 per cent and 5 per cent by 2035 would produce what the firm describes as “significant long-term benefits” for growth and productivity.

The findings lend economic weight to what has until now been framed largely as a security imperative. Sir Keir Starmer pledged at the Nato summit in June 2025 to spend 5 per cent of GDP on national security by 2035, including 3.5 per cent on core defence, as geopolitical tensions and pressure from Washington compelled allies to bolster their military budgets.

Yet translating ambition into action has proved problematic. The government’s ten-year defence investment plan, expected last autumn following the publication of its strategic defence review, has been repeatedly delayed owing to a £28 billion funding gap in the Ministry of Defence budget over the next four years. Neither the Treasury nor the MoD has set out a clear pathway to meeting the spending targets.

EY’s analysis, drawing on Office for Budget Responsibility forecasts and GDP projections, estimates that reaching the 3.5 per cent target would require an additional £31 billion of real-terms spending by 2035. Hitting 5 per cent would demand an extra £77 billion.

The potential returns, however, are considerable. The proposed increases could lift GDP by 0.8 per cent, generating £30 billion in additional annual economic output by 2045, according to the firm’s modelling.

Central to EY’s thesis is the relatively self-contained nature of Britain’s defence industry. Approximately two thirds of annual private sector spending by the MoD flows to UK-based suppliers, with just 31 per cent going overseas either directly or through the supply chains of domestic companies. That high proportion of domestic retention means more of every pound spent stays within the British economy, supporting jobs and underpinning industrial capacity.

Peter Arnold, UK chief economist at EY, said the defence sector is more capital-intensive than other areas of government spending, particularly in its support of manufacturing. A considerable share of the MoD’s budget is also directed towards research and development, which has the potential to produce dual-use technologies with commercial applications in fields such as aviation and cybersecurity.

Nearly a third of the MoD’s budget, roughly £20 billion, is allocated to capital expenditure on infrastructure, equipment and technology, rather than routine operational costs such as salaries and accommodation. That balance between current and capital spending gives defence investment an outsized economic multiplier compared with many other areas of public expenditure.

EY’s report also urged ministers to accelerate procurement processes and provide greater clarity over equipment priorities to encourage private sector investment. The call echoes longstanding frustrations among smaller defence contractors. The Federation of Small Businesses has argued that the procurement system remains skewed towards larger firms, leaving smaller enterprises struggling to compete for contracts.

The MoD said it was delivering what it described as the biggest uplift in defence spending since the Cold War, with £270 billion of investment across the current parliament. Since last July, the department said it had signed almost 1,200 major contracts, with 93 per cent of that spend directed to UK-based companies. It also pointed to the launch of a dedicated Defence Office for Small Business Growth earlier this year and a commitment to increase spending with SMEs by £2.5 billion a year by May 2028.

Whether these measures will prove sufficient to close the gap between political rhetoric and fiscal reality remains to be seen. But EY’s analysis makes a compelling case that, if managed wisely, increased defence spending need not be viewed solely as a cost of security. it could become a genuine engine of economic growth.

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Higher defence spending could unlock £30bn annual boost for UK economy