The defence sector is changing in a way that should make Welsh businesses look again at where they fit. This is no longer only about a narrow group of specialist suppliers serving a closed market. It is increasingly about technology, manufacturing, data, cyber, logistics, resilience, skills and exportable capability, and that makes the opportunity far broader than many SMEs may realise.

A Welsh manufacturer that wins its first defence contract is not simply adding another customer. It is learning how to meet demanding standards, how to work with primes, how to evidence its capability and how to position itself for markets that may extend far beyond the UK.

That is the bigger opportunity now in front of Welsh SMEs. Defence spending is important, but the firms that approach this properly will not see it only as a domestic procurement exercise. They will see it as a route into innovation, export potential, higher-value skills and supply chains being reshaped by governments and industry across allied markets.

Last year’s Strategic Defence Review set out the capabilities the UK needs in response to a more unstable world. The recently-published Defence Investment Plan now provides an indication of the resources to pursue those objectives, backed by £298 billion of investment over the next four years, including a promised £15 billion of additional spending on top of last year’s Spending Review. That level of commitment creates demand, but it also creates a challenge for industry to respond at pace.

For a long time, defence could appear to be a niche market served by specialist companies providing direct capability to the MoD or to the supply chains of prime contractors. That remains part of the picture, but the market is broadening. Businesses involved in cyber, artificial intelligence, dual-use technologies, advanced manufacturing, logistics, professional services, communications, data, electronics, drones and advanced materials all have something to consider.

So do the caterers, cleaners and facilities firms providing the supporting services that allow companies within defence and security to operate. We sometimes talk about defence as though it begins and ends with the platform, the vehicle, the vessel or the system, but behind every major capability sits a much wider network of businesses making delivery possible.

That breadth is important for Wales. We have strong manufacturing capability, world-class engineering expertise, for example at General Dynamics Land Systems in Merthyr Tydfil, excellent universities and research institutions, advanced aerospace capability, automotive supply chains and a growing cyber and semiconductor cluster in South Wales. These strengths are relevant not only to defence, but to security and resilience in the wider sense.

The UK Government has also said its plan will boost Wales’ role as a site of testing and development for autonomous technology and uncrewed aerial systems. The £50 million Wales Defence Growth Deal is intended to make it easier for Welsh SMEs to gain more direct access to defence contracts by helping them secure the proper clearances and access, rather than always having to go through prime contractors for certain classified work. For smaller businesses, that could be an important shift.

The export dimension should sharpen the focus further. UK Export Finance has announced a new £50 billion Defence Export Fund to support large-scale UK defence exports and increase its total capacity to £130 billion. That support is intended to help British defence companies of all sizes, whether they already export or are looking to expand internationally.

For Welsh SMEs, the opportunity is therefore not only domestic. NATO partners and allied nations are also responding to the same global pressures, and businesses that can prove their capability here may find wider markets opening up. A company that learns how to operate within demanding defence and security supply chains may be building a platform for growth that lasts well beyond one contract.

Over the last few months, one lesson has become increasingly clear to me: the businesses most likely to succeed are those that engage early. They build relationships, invest in capability, develop their people and understand where they might fit in supply chains before opportunities are fully formed in front of them. They do not stand back until every procurement pathway is obvious, because by then others may already have built the relationships, knowledge and confidence needed to move.

That does not mean SMEs should enter the market blindly. Defence can be difficult to access, and procurement can feel impenetrable. Businesses need to understand the hurdles, whether those relate to security, standards, qualifications, accreditations or relationships with primes. They also need honest advice about whether the market is right for them, because useful engagement is better than wasted effort.

At Business in Focus, we are trying to help with that through our Defence in Focus consultancy service, which works with SMEs to understand where they are now, where they want to go and how their ambitions might fit within defence procurement. We also deliver the Defence Supplier Capability Development Programme, which supports SMEs from across the UK with capabilities that could be brought to the MoD.

And our event, Defence Security Resilience Cymru in September, is designed to bring this wider opportunity together under one roof. It will connect buyers, primes, government, investors, academia, SMEs, innovators and international partners, while also bringing young people from colleges across Wales into contact with prospective employers.

Wales has a genuine chance to be seen as a serious player in defence, security and resilience. That will require businesses to engage early, understand where their capability fits, invest in the physical and human capacity required, and position themselves for the supply chains now taking shape.

Phil talks about this and more on the Defence Security Resilience Cymru podcast. Listen here:

Find out more about Defence Security Resilience Cymru, being held at ICC Wales in Newport on September 3 and 4 2026, here: https://www.dsr.cymru/