One company that makes critical armoured vehicles used by the British military, including by Special Forces in Afghanistan and Iraq, was turned down by HSBC for a bank account whilst others have struggled to get loans or investment for future manufacturing. Often the reasons for a bank refusing to offer facilities are not given but can be linked to involvement in potential “lethal” activities or not being “green” enough.
The government has recently promised to increase defence spending to 2.5 per cent of GDP raising funding by £6bn a year. Chancellor Rachel Reeves is keen that small and medium-sized defence manufacturing firms help drive economic growth.
SC Chief Executive Nicholas Ames claims it was almost impossible to arrange a commercial loan to invest in future manufacturing in Britain because lenders were only looking to finance green companies.
He said: “Every time we [approach] banks, debt funds or equity funds, they’re all going: ‘we’ve all moved into [ethical investing], we’ve all moved into the green funds. Come back to us with something green.’”
The defence industry has long complained about so-called environment, sustainabily and governance (ESG) red-tape that critics say guide investors away from the British defence sector.
The company is now considering relocating to the US and claims it currently has three US states pitching for them to move across the Atlantic, but the firm is waiting to see if ministers act on their pledge to investigate the issue.
Labour leader Sir Keir Starmer has put defence and security at the centre of his platform since arriving at Number 10 last July. (Photo: Stefan Rousseau/PA).Mr Taylor said: “There are only probably one or two high street banks that have reliably offered bank accounts to defence companies. We have had a number of colleagues be debanked just before tenders, especially when there is a transition from what would be considered non-lethal to lethal work.”
He said: “We have basically, as a company, stopped going to investment meetings in the UK. They were just complete waste of time. We were turned away at meeting rooms. We’ve been turned away before the meetings. We’ve been turned away in the room. The second defence comes up: ‘Not interested. Sorry, can’t.”
Last week Defence Minister Maria Eagle met with several banks and defence companies after two Labour MPs launched a campaign to help defence firms get access to finance.
He said: “We need to make sure we’ve got a UK sovereign capability to invest in British defence…on the EU and the US, we don’t know. We can’t rely on [them]. We need our own sovereign industrial base building and making things in Britain.”
‘Debanking’ defence firms increases threat to Ukraine
It comes as similar issues in Europe have caused the EU to take action to ensure defence spending was considered ethical as Europe faces up to providing significant additional huge military support to Ukraine.
The UK Sustainable Finance Association, which represents a number of major investors and pension funds, rejected the argument that sustainable funds regularly exclude defence firms.
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A UKFinance spokesperson said: “The UK banking sector is fully committed to supporting defence companies… Providing finance in this area is complex and banks can face the threat of violent protest. They must also ensure they comply with a range of domestic and international laws and regulations. “
A government spokesperson said: “We have been clear that we see no conflict between sustainable investment and investment in our world-leading defence sector… We continue to consult widely with defence and financial services stakeholders to tackle barriers around access to finance.”
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