The British government is considering joining a new international defence investment bank designed to unlock cheaper financing for military projects as pressure grows on the UK to increase defence spending.
Chancellor John Healey is examining whether Britain should become part of the proposed Defence, Security and Resilience Bank, or DSRB, a Canada-led initiative expected to provide governments and defence companies with access to lower-cost, long-term financing.
Healey became Chancellor of the Exchequer in July 2026 after previously serving as defence secretary, a role in which he had supported exploring multinational approaches to funding Britain’s growing military requirements.
Treasury officials have stressed that no final decision has been made.
Canada Leads Push for Multinational Defence Financing
The DSRB is intended to operate as a multilateral financial institution capable of mobilising both public and private capital for defence, security and resilience projects.
Canada formally announced the initiative alongside Albania, Belgium, Greece, Latvia, Luxembourg, Romania, Türkiye and Ukraine at the NATO summit in Ankara in July.
The participating governments said the institution would seek to lower financing costs, expand access to capital and increase defence-industrial capacity across member countries. Its founders hope the bank could begin operating as early as 2027.
Reuters reported in August that organisers were seeking to raise around €100 billion for the institution, although several large economies had yet to commit at that stage.
Healey Reconsiders Proposal Previously Rejected by Treasury
The renewed discussions represent a change from the UK government’s earlier position.
When Rachel Reeves was Chancellor, the Treasury did not proceed with British membership of the DSRB, instead supporting a separate initiative known as the Multilateral Defence Mechanism.
Healey, who was defence secretary at the time, had advocated broader international financing arrangements before resigning from that position in June. He later became Chancellor following the political changes that brought Andy Burnham into Downing Street in July.
The UK and Canada have previously said the DSRB and Britain’s Multilateral Defence Mechanism do not necessarily have to compete. In a joint statement issued in July, the two countries said the initiatives could operate alongside one another and potentially strengthen defence investment across participating economies.
Membership Would Require Significant UK Investment
Joining the DSRB would not come without an immediate financial commitment.
According to the proposal under consideration, UK participation alongside other major economies could require an upfront contribution of roughly £870 million spread across three years.
Supporters argue that the investment could ultimately allow Britain to borrow more cheaply for eligible defence programmes while also improving access to financing for companies involved in military production.
The concept is based partly on the model used by international development banks, where contributions from governments help establish a strong credit rating that can then be used to raise larger amounts of money from financial markets.
Canada and the other founding supporters say the DSRB is intended to supplement existing national and international defence programmes rather than duplicate them.
Defence Spending Becomes Major Challenge for Treasury
The discussions come as Healey prepares for an October Budget and a subsequent spending review, with defence emerging as one of the government’s most significant financial pressures.
Britain has been debating how quickly military expenditure should rise as European countries increase spending in response to Russia’s invasion of Ukraine and a broader deterioration in the continent’s security environment.
The government has maintained a longer-term ambition to increase defence expenditure while simultaneously facing competing demands on public finances.
Finding ways to attract private capital into the defence sector has already become part of government policy. Earlier in 2026, the Treasury and Ministry of Defence launched work examining how private-sector financing could accelerate military readiness and expand Britain’s defence-industrial base.
Burnham Government Deepens Defence Financing Talks With Canada
The latest consideration of DSRB membership also comes amid closer discussions between London and Ottawa.
Canada’s Prime Minister Mark Carney has played a leading role in promoting the proposed bank internationally, while Britain has continued developing its own multinational financing mechanism.
Prime Minister Andy Burnham had been expected to meet Carney in Britain on Wednesday before cancelling engagements following the death of his father.
Burnham became UK prime minister on July 20 after returning to Parliament and subsequently becoming Labour leader.
A British government spokesperson said the UK remained committed to working with international partners to expand defence-industrial capacity and was coordinating with Canada to ensure the DSRB and Multilateral Defence Mechanism could complement each other.
NATO Chief Arrives as European Security Concerns Intensify
The debate over defence financing coincides with NATO Secretary General Mark Rutte’s visit to Britain for his first face-to-face meeting with Burnham as prime minister.
Rutte is expected to use a speech in Oxfordshire to praise Britain’s defence commitments and argue that the country is demonstrating that it is “serious about security.”
His visit comes as NATO governments confront continuing tensions involving Russia and the alliance’s eastern members.
NATO fighter jets shot down a drone in Lithuanian airspace on September 15 after Lithuanian officials said it had crossed from Belarus and was likely carrying explosives. The incident marked the first such interception over Lithuania.
Denmark and Russia Trade Accusations Over Baltic Sea Incident
Security concerns have also intensified in the Baltic Sea following a confrontation involving Danish and Russian forces.
Denmark said a Russian frigate fired two emergency flares towards one of its military helicopters while the aircraft was conducting what Copenhagen described as routine photographic surveillance in international waters.
Danish officials said one flare passed close to the helicopter and summoned Russia’s ambassador over the incident.
Moscow disputed Denmark’s account of responsibility. Russia’s ambassador accused Danish military helicopters of carrying out dangerous manoeuvres close to Russian vessels and delivered a protest of his own to Copenhagen.
The competing accusations reflect the heightened military tensions surrounding NATO’s eastern and northern European borders.
Rutte Says Russian Pressure Will Not Halt Support for Ukraine
Against that backdrop, Rutte is expected to reiterate NATO’s commitment to supporting Ukraine and strengthening European defence capabilities.
The NATO secretary general has repeatedly argued that alliance members must continue expanding military production and supplying Ukraine. During a Ukraine Defence Contact Group meeting earlier in September, he urged participating countries to maintain support with what he described as the “utmost urgency.”
The UK’s consideration of joining the DSRB therefore forms part of a wider debate over how NATO governments can finance rising military expenditure without relying entirely on conventional national borrowing and taxation.
No decision has yet been announced, but joining the Canada-led bank would represent another significant step towards multinational financing as Britain seeks to meet growing defence commitments while managing pressure on its public finances.
