Consultation launched on proposed UK Offsets policy

Image courtesy ADS  

On Thursday 23rd October 2025, Luke Pollard MP, the Minister for Defence Readiness & Industry at the UK MoD, used the DPRTE Conference in Manchester as an opportunity to formally launch public consultations on the possible creation of a UK Offsets policy, as announced in the Defence Industrial Strategy (DIS), published on Monday 8th September 2025 (https://assets.publishing.service.gov.uk/media/68bea3fc223d92d088f01d69/Defence_Industrial_Strategy_2025_-_Making_Defence_an_Engine_for_Growth.pdf). 

The DIS 2025 summarises the plans for the UK MoD to frame and adopt a UK offset policy, following detailed consultations with Industry (pages 52 and 53, Section 4.2.1). ADS will be seeking to become heavily involved in that, to assist the UK MoD to come up with a policy which offers real, tangible benefits to the country.
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The use of ‘Offsets’ and ‘Industrial Participation’ are common and increasingly standard features in the awarding of export contracts in a number of sectors around the World but are most commonly historically associated with defence contracts. They typically involve large value contracts which are placed by a national government. 

Offset is now a key factor to success in many of the most important export markets around the World and an annual report to Congress on ‘Offsets in Defense Trade’ (www.bis.doc.gov/index.php/other-areas/strategic-industries-and-economic-security-sies/offsets-in-defense-trade), the US Department of Commerce noted that: ‘The importance of Offset now transcends the traditional technical ones [ie quality, price and delivery] in the procurement decision making process’.
 
Offset-type policies can be used to support the government’s argument for procuring equipment that is perceived to be ‘superior’ and then using that purchase, via an offset-type obligation, to improve the quality of the local defence industry and consequently to improve its prospects of securing export orders. 

In this scenario, the stated goal of the government requiring an offset-type obligation is not just about creating jobs but also in improving defence capabilities within that country. 

Since the early-1970s the Republic of Korea and Türkiye have consistently used this strategy quite effectively to get their indigenous defence industries to become part of the supply chain for foreign designed defence products and the fact that the foreign suppliers have continued to use their suppliers after the offset obligation had been fulfilled clearly demonstrates that this has delivered mutual benefits.

The most recent announcement (https://www.gov.uk/government/consultations/defence-industrial-strategy-dis-offset-written-consultation/defence-industrial-strategy-dis-offset-written-consultation) sets out some clear questions which need to be addressed and answered, including:

(a.) What are the benefits and risks of introducing an offset policy in the UK?

(b.) What are the opportunities for greater international collaboration from introducing a UK offset policy? What can be learned from the offset policies of other countries (such as those listed above)?

(c.) How would the introduction of an offset policy impact the defence market in the UK?
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The UK MoD has stated that a UK Offset mechanism would aim to:

(a.) Support UK industrial growth by driving investment into the domestic defence sector.

(b.) Enhance strategic outcomes such as greater SME participation in defence supply chains, skills development, innovation and supplier resilience.

(c.) Strengthen international partnerships and industrial collaboration delivering measurable economic benefits to the UK taxpayer.

(d.) Take a proportionate approach to where we apply requirements, with active consideration of the competitiveness of our defence industry and particularly of SMEs and non-traditional suppliers.

Certainly, the UK’s previous Industrial Participation Policy (1990-2011), when it was assessed by one of the World’s greatest academic experts in offset matters, Professor Ron Matthews, of Cranfield University, at its 20th anniversary in 2010, emerged with a very positive assessment of its tangible benefits, especially for SMEs seeking to break into the supply chains of a large number of major overseas Prime Contractors. 

Once established within those supply chains, they very often have had the ability to demonstrate the quality of their capabilities and then retained their places as established suppliers to the Primes in question.

When the issue of a possible ‘Revised Industrial Participation policy’ was previously raised in the Defence & Security Industrial Strategy of March 2021, Industry sought to provide constructive input to enable the framing of a beneficial policy by the UK MoD but was disappointed when in 2024, as a result of some pilot programmes, it was concluded that this should not be pursued further. 

However, this recent announcement has reinvigorated interest in the subject, especially within the offset practitioner community, who readily perceive the very real, tangible benefits that some other nations – including the likes of Australia, Canada, South Korea, Netherlands, Norway and Türkiye, amongst others – have gleaned from their offset-type policies to enhance their national economies and indigenous industrial capabilities and believe strongly that a well-crafted policy could achieve similarly positive results for the UK.

The UK MoD will be inviting responses from the full range of defence sector stakeholders to the questions and proposal and ADS Group will be providing robust support for this initiative.

For further details: [email protected]