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UK's "Bomb Bank" Aims to Fund Defence Dreams
21 Jun
Summary
- Defence firms struggle with current banking rules that increase lending costs.
- A new £100bn Defence, Security and Resilience Bank is proposed to increase finance.
- The proposed bank could more than double lending support from capital.
- Entrepreneurs like James Thomas face cash flow challenges to scale up.
James Thomas, creator of Britain's answer to Starlink, highlights the funding struggles faced by defence entrepreneurs. His company, Jet Connectivity, requires substantial cash flow to meet growing demand, a challenge exacerbated by current banking regulations. These Basel rules often classify defence firms with long project cycles and complex supply chains as high-risk, necessitating banks to hold more capital, thus making loans less attractive or more expensive.
To bridge this financing gap, a £100bn Defence, Security and Resilience Bank (DSRB) is being promoted. Backed by investors and potentially sovereign credit guarantees, the DSRB aims to significantly increase lending capacity. Insiders suggest it could more than double the capital-to-lending ratio, potentially unlocking billions for the defence sector. Despite support from various quarters, including the Ministry of Defence and MPs, Treasury-led efforts to establish the bank have faced governmental hurdles, underscoring a broader challenge in financing long-term defence investments.
