News & Views

With rising global tensions, the UK government has committed to boosting defence spending over the coming years, but the City of London also has a powerful role to play in supporting Britain's rearmament, should it choose to do so.

Having served in the British Army in the UK, Germany and Canada, I have an ongoing respect and admiration for what our armed forces do for us each and every day. We often consider their importance at times of dramatic need or in memory of great wars, but in reality it is their constancy that has contributed to the level of peace we have enjoyed for so long.

Indeed, we recently celebrated VE Day marking 80 years in which we have had, not total, but a large amount of international peace; certainly in that period British citizens have not been called to defend themselves (although I am very mindful that when I served in the early 1990’s it was said that there had only been one year since the end of WWII that a British serviceman had not been killed on active service, and sadly more servicemen and women have died in subsequent years). However, this is a reality that is looking increasingly precarious, and last year the Chief of the General Staff, General Sir Roly Walker, said in his first speech that the army has three years to prepare to fight or deter war, given that geo-political threats could converge in 2027. This echoed his predecessor, Sir Patrick Sanders, who described the current generation as a “prewar generation”, warning of the need to train a citizen army.

Mindful of this, and the City’s historically supportive and proud associations and affiliations with the armed forces, I asked the Chair of the Policy & Resources Committee at Questions in Common Council how the City is planning to play its part in this preparation. It is a question I posed in part to remind those newly elected members that these threats could become reality in this four-year term, and that it will be on their ‘watch’. I do not provide a specific answer, but believe it is important we all consider it, as members of the City of London community, within our inherent role to serve the nation.

Trade as the first line of defence

Alongside my belief in the importance of our armed forces for conventional forms of defence and peacekeeping, I also recognise their inextricable link with global trade. Peace allows markets to thrive and for business to be done internationally, and in a symbiotic relationship trade also acts as a facilitator to international relations. I consider that everyone contributing to the economic success of the UK has a powerful role to play in that. I wrote some time ago about trade as the first line of defence, and to some extent we have seen that with the imposition of sanctions on Russia.

My thoughts on this are not unique. For one, they echo the words of Admiral Sir Tony Radakin, who said in his 2022 Lord Mayor of London Defence and Security Lecture, when he was Chief of the Defence Staff:

"...we should recognise the authority and agency that the military instrument offers, and we should willingly embrace the ability of the Armed Forces to support our national interest in all its forms."

He continued: "...markets thrive on stability, and our prosperity rests on a world that is safe for the passage of trade. And when the rules are broken, volatility and instability follow. When aggression is left unchecked the costs ricochet through global markets. This affects people everywhere, and especially the world’s poorest."

What UK defences currently look like

As things stand, the UK, and many other European countries, are not in an optimal position to defend themselves and others against aggressors. For context, in 1938 the total strength of UK service personnel (regulars) stood at 384,000, rising to nearly 1.1 million by the end of 1939. On 1st January 2025 the strength of the UK armed forces was placed at 180,780, including reserve personnel. That's down from the same time last year, when it stood at 183,130.

That is not to be all doom and gloom - we know that in the recent Strategic Defence Review one of the government’s commitments is to boost defence spending to 2.5% of GDP by 2030, although this remains behind the USA, which last year planned to spend 3.4% of GDP on defence, as well as other Nato members, like Poland, which expected to spend 4.1% of GDP. Furthermore, across the decades much of the focus has indeed been on a softer side of defence - building strategic relationships in particular. Notably, in March this year, the Universal Defence and Security Solutions (UDSS) hosted a Spring Reception for UK Defence Attachés at Guildhall, with the express goal of helping the UK and its partners navigate an increasingly complex international security environment. They write:

"As Defence Attachés prepare to represent the UK in some of the most strategically significant regions around the globe, UDSS stands ready to provide tailored support throughout their deployments. The Spring 2025 Reception not only strengthened professional connections but also reaffirmed UDSS’s dedication to advancing global defence readiness and strategic influence."

However, it’s not enough, and nor is it enough for the rest of us to leave support of the armed forces and defence preparations to someone else.

How the City can support the rebuilding of UK defences

Ensuring that the financial system is prepared and ready to provide capital to expand the defence infrastructure is imperative. However, many defence companies are finding themselves up against a barrier as some banks will not lend money to them because they are deemed to be unethical. Perhaps it is a sign of how fortunate we have been for so long, or maybe it's an overly simplistic view of what it means to be ethical that this line of thinking prevails. Either way, it is a barrier to defending ourselves that I (and people far more intelligent than me) don't think we can afford.

For example, in an article titled '‘Deluded’ banks driving up the cost of British rearmament', last month The Telegraph wrote about how many high street lenders were refusing loans and sometimes even bank accounts to military contractors. This effectively discriminates against defence companies under ESG guidelines and B Corp statuses that prohibit working with "controversial industries". The net result is that leading military suppliers warn it is driving up the cost of the UK's rearmament efforts, which seems problematic.

Furthermore, with the size of the British armed forces currently being at their smallest since before the Napoleonic wars, and with more people leaving than joining, if things escalate in the wrong direction there will be a greater call on the civilian population. We must therefore ask ourselves how the economy, businesses, and society prepare for that?

A good place for companies to start is by reflecting on how they honour the Armed Forces Covenant, which seeks to encourage us all to look after service people and their families. There is a dedicated covenant for businesses, which organisations wishing to demonstrate their support for the armed forces community can sign up to, making a range of written and publicised promises, and embedding those structures into their operations.

I would also urge you to read the new landmark paper from TheCityUK and ADS Group Ltd, titled Finance and investment for UK defence. It emphasises the need for the government to develop mechanisms that reduce perceived risks in the defence industry for finance and investment communities, outlining recommendations to enhance the financing environment for defence sector businesses through improved partnerships with financial and related professional services.

Just War Theory and the ethics of defence

For some, the idea of investing in defence offends moral sensibilities. It is a position I understand - my wife’s grandfather was a conscientious objector in WWII - we are privileged enough to have enjoyed peace as the ethical gold standard. However, to my mind, peace at any cost seems just as unethical as aggression without cause. Furthermore, sometimes the best way to ensure peace is to show you are able to defend yourself and others in the face of bullies. I believe that ultimately, there is a moral imperative to protect the weak and defenceless from violence and aggression.

Winston Churchill is known for his ability to slice to the heart of the matter with a pithy quote. Accordingly, he is said to have responded to Neville Chamberlain's victorious pronouncement that the 1938 Munich Agreement, permitting German annexation of the Sudetenland to be a triumph for peace, by saying:

“You were given the choice between war and dishonour. You chose dishonour and you will have war.”

To that end, and as a final point of contemplation, I think it's important to reflect on what we may consider ethical defence to look like, and perhaps ethical war should it come to that. Great philosophical debates have raged across the centuries about just warfare. There's a general consensus that war for self- and other-defence is considered ethical, specifically if it aligns with the principles of Just War Theory. The international rules of war have been carefully considered with those in mind, most notably perhaps in the 1949 Geneva Conventions. However, the world is more complex, with more touch points between different world views, than was the case when this, and the philosophy it was based on, was prepared. So, great wisdom is required when dealing with the wider world and we cannot assume naively that everyone will apply the same philosophical principles.

Most of the details of Just War Theory and the Geneva Conventions are not currently especially relevant to businesses themselves, except to have the individual autonomy to think proactively about your position, rather than excluding support for military organisations because of a reactive view that anything related to defence may offend ESG guidelines.

Inevitably, we will all have slightly different ideas as to where the ethics on defence lie, and it's our great honour as a free country to have the liberty to debate those points. For my part, I believe defence is ethical, and protecting the poor, disadvantaged, and one's home is ethical. To that end, I believe our armed forces are essential for maintaining our hard won peace, that we are fortunate to have them, and that the City of London and all its individual members matter in achieving and maintaining that goal as well. My counsel, for what it's worth, would be to ask you to consider that, and contribute in whatever way you can.