On 30 October 2026, the Ministry of Defence published the UK Offset Policy alongside a joint press release with HM Treasury. The change is aimed at selected defence and national security purchases from overseas, with ministers seeking to secure additional industrial and economic value in the UK when procurement cannot be met domestically. (gov.uk)
The headline threshold is £50 million, but the policy is more targeted than the launch language first suggests. GOV.UK says contracts above that level will be considered for offset, while the policy paper states that £50 million is the default trigger and that the Ministry of Defence may raise or lower it where market conditions, acquisition profile or implementation capacity justify a different approach. That makes the threshold a starting point for case selection, not an automatic rule for every overseas award above the line. (gov.uk)
Where offset is applied, the standard expectation is substantial. The policy paper says suppliers will normally sign a separate Offset Agreement linked to the main procurement contract, with the standard commitment usually set at 100 per cent of the eligible foreign contract value. Ministers have presented that in practical terms as British jobs, apprenticeships, factory investment, support for domestic suppliers, technology transfer and wider use of UK-made components, although the Authority can set a lower obligation where a full 100 per cent is not justified. (gov.uk)
The legal boundaries are also explicit. The policy says offset must be used consistently with the Procurement Act 2023, domestic law and the UK’s international obligations, and it is not to be imposed where treaty terms or other binding arrangements prevent it. It also does not displace the basic requirement to secure capability, value for money and lawful procurement outcomes. In practice, that means offset sits alongside the defence purchase rather than replacing the normal test of whether the equipment or service should be bought. (gov.uk)
A new Offset Authority is intended to run the system. According to the policy paper, it will negotiate agreements, approve projects, apply valuations and multipliers, monitor delivery and report annually on implementation, with fuller guidance due before the regime is applied in 2027. Suppliers will normally have up to ten years to fulfil commitments, against milestones of 30 per cent by year three, 50 per cent by year five and 100 per cent by year ten, with annual reports due by 31 March. Remedies for non-compliance can include financial compensation, bank guarantees, credit adjustments and, where lawful and proportionate, exclusion from future competitions. (gov.uk)
The government is pitching the policy as a response to the scale of overseas defence spending. The press release says more than £35.2 billion was spent on defence contracts and services with overseas industry between 2016/17 and 2025/26, equal to 11 per cent of total MOD direct expenditure with industry and commerce over that period. At the same time, ministers say 85 per cent of MOD expenditure already goes to UK firms, with £34.1 billion spent with UK-based businesses last year and MOD investment supporting 274,000 jobs across UK industry. The argument is that imports will still happen, but more of the industrial return should be captured at home. (gov.uk)
There is a clear place-based and industrial strategy dimension. The announcement was made at BAE Systems’ Scotstoun site in Glasgow, and the government used the launch to point to Scotland’s defence economy, which it values at about £2.5 billion and 12,200 direct jobs, alongside the Norway Type 26 frigate export deal and Typhoon radar work in Edinburgh. More broadly, ministers have tied the Offset Policy to the Defence Industrial Strategy, the £298 billion Defence Investment Plan and the Budget 2026 ‘Back British’ approach, against a target of 3 per cent of GDP on defence in 2030 and NATO’s 3.5 per cent benchmark for 2035. (gov.uk)
For suppliers, the practical issue is early preparation rather than post-award negotiation. The policy says bidders must confirm that they will enter an Offset Agreement where the requirement has been notified, and the main procurement contract will not normally be signed until that agreement, or an approved alternative, is in place. Approved activity can cover direct workshare, onshore support and upgrades, or indirect measures such as research and development, skills, supply-chain integration, exports and regional industrial growth. The paper also allows enhanced credit where activity strengthens regional clusters, apprenticeships or SME participation, which points firms towards substantive UK delivery rather than nominal commitments. (gov.uk)
The immediate timetable is limited but important. The Offset Policy was published on 30 October 2026 and, according to the press release, will apply only to a select number of procurements from April 2027, with suppliers to be notified early and clearly where offset conditions will attach. For UK SMEs, universities and mid-tier manufacturers, that could open a new route into major defence programmes, particularly as the Authority is expected to maintain a public list of live obligors. The government says the model also brings the UK closer to allies already using offset-type arrangements, including Poland, Norway and the Netherlands. (gov.uk)