Chancellor Weighs £870m Bid to Join New Defence Lending Bank

Chancellor John Healey is considering a bid for the UK to join a new international bank to fund defence spending. BBC

The Defence, Security and Resilience Bank (DSRB) is a multilateral bank, owned by several countries together. Canada is leading work to set it up. Supporters said it would let governments borrow more cheaply to spend more on defence.

Treasury officials said no decision has been made. They said membership for the UK and other G7 countries, the group of seven large advanced economies, would cost about £870 million upfront, spread over three years.

The job is now held by Healey. As defence secretary, he privately pushed for Britain to join the bank to raise money. Former Chancellor Rachel Reeves had rejected the idea.

In its formal response, the government said it was “working closely with Canadian allies on ensuring the Multilateral Defence Mechanism and Defence Security Resilience Bank are complementary.” It said it was “fully committed to working alongside international partners to scale defence industrial capacity.”

Canadian Prime Minister Mark Carney has pushed the idea internationally, the BBC reported, and is said to be keen for the UK to join. BBC The bank already has backing from Albania, Bulgaria, Belgium, Greece, Latvia, Luxembourg, Romania, Turkey and Ukraine.

Reuters spoke to eight people with knowledge of the talks. Reuters Some questioned whether the new bank could offer cheaper loans than highly rated national governments can secure on their own.

The broader context here is a familiar Whitehall argument over defence money. The Defence Secretary tends to want faster procurement — buying kit more quickly — and a bigger pipeline of work for industry. The Chancellor must weigh the joining fee, possible future liabilities and whether joint borrowing would truly cut borrowing costs for a country like the UK, which can already borrow through its own deep gilt markets, the market for UK government bonds.

In my view, the careful wording on the two schemes should be read as keeping options open. It shows goodwill to Ottawa without committing London to paid-in capital over three years. The open questions are how the bank would be run, what credit rating it would get, whether UK firms could bid for funded work, and whether its loans would ease pressure on the defence budget or simply add another bill. Officials said none of those points is settled.