Welcome to Visiongain Market Watch: Aerospace, Defence & Security

Defence procurement is becoming one of the most important battlegrounds in national security.

The issue is no longer simply whether governments are spending more. It is whether they can turn that spending into deployable capability quickly enough.

This week, the UK and the United States both moved to close that gap. The US is using multi-year procurement agreements to give industry the confidence to invest in production capacity, particularly across missiles, interceptors and other high-demand systems. The UK is tightening incentives, rewarding suppliers who deliver on time and on budget while reducing returns for those who do not.

The message to industry is clear: future defence growth will favour companies that can deliver at pace, absorb risk and prove they have the industrial depth to meet rising demand.

Visiongain Top Takeaways

• Procurement is now a readiness issue: The UK and US are trying to close the gap between rising defence demand and the speed of delivery to the front line.
• Supplier performance will matter more: The UK’s incentive model links profit more closely to delivery, cost control and risk-sharing.
• Private capital is becoming critical: US multi-year procurement is designed to give industry the confidence to invest in production capacity.
• Affordable mass is moving up the agenda: Low-cost missiles, munitions expansion and counter-UAS integration point to growing demand for systems that can be produced at volume.
• Industrial resilience is now a market advantage: From UK steel to US missile supply chains, defence growth is increasingly tied to sovereign capacity and reliable production.

United Kingdom: Profit Incentives Target Defence Delivery

The UK has announced new rules designed to link supplier profit more directly to contract performance, reinforcing a wider shift across allied defence procurement towards speed, accountability and industrial readiness.

The reforms to the Single Source Contract Regulations will allow suppliers to earn more for completing projects on time and on budget, while those that fall short could receive less. Incentive payments will rise from 2% to up to 10% of costs, but only when suppliers meet agreed targets.

The government said the changes are intended to get equipment to the Armed Forces faster and more efficiently, while making it easier for smaller and innovative businesses to work with defence. The reforms also support commitments made in the Strategic Defence Review and Defence Industrial Strategy.

Minister for Defence Procurement and Industry, Luke Pollard MP, said:

“To deliver the warfighting readiness our country requires, we need procurement that delivers on time and on budget. We inherited a programme where 96% of our major defence projects had issues with delivery or cost. That is not acceptable. That’s why suppliers who deliver better outcomes and take on appropriate risk will be rewarded, but those who do not, will make less profit. That is how we make sure we get more equipment to the front line faster.”

The reforms introduce four key changes:

• Higher incentive payments: Maximum supplier incentive payments will increase from 2% to 10% of costs, but only when suppliers meet agreed performance targets.
• Lower profit floors on lower-risk contracts: Suppliers could earn less unless they improve performance, while higher-risk contracts can attract stronger returns.
• New Innovation Uplift: Suppliers, particularly smaller businesses and new entrants, can be rewarded for investing their own money in developing new products without a guaranteed government contract.
• Higher regulatory threshold: The threshold at which contracts fall under the regulations will rise from £5 million to £25 million, meaning nearly all SMEs will no longer need to comply with mandatory reporting regulations, while keeping 97% of single-source contracting value within the model.

Rupert Pearce, National Armaments Director, said:

“The NAD Group is committed to driving greater performance across the defence enterprise. These changes give us better tools to reward innovation, incentivise delivery, and ensure that public money is spent where it generates real value. We will work closely with industry and the Single Source Regulations Office to implement them effectively.”

Visiongain Insight: The UK reforms shift defence procurement further towards performance-based industrial policy. By tying profit more closely to outcomes, the MOD seeks to reduce programme slippage, improve supplier accountability, and reward companies willing to take on greater risk. For industry, the message is clear: future margins will depend increasingly on execution, not only contract access.

United Kingdom: RCH 155 Contract Strengthens Artillery and Sovereign Supply Chains

The MOD has announced that 72 Remote Controlled Howitzers, known as RCH 155, will be procured under a nearly £1 billion contract, marking a major step in rebuilding the British Army’s artillery capability.

The contract includes initial training and in-service support and has been awarded by the Organisation for Joint Armament Cooperation, OCCAR, on behalf of the British Army to ARTEC GmbH, a joint venture between KNDS and Rheinmetall.

The RCH 155 is designed to fire up to eight rounds per minute and strike targets up to 70km away, giving the British Army a long-term close-support artillery system.

The weapon systems, including the barrel, breech, recoil system and trunnions, will be manufactured at Rheinmetall’s large-calibre production facility in Telford. Rheinmetall is set to use British steel supplied by Sheffield Forgemasters, supporting the UK Steel Strategy and wider national resilience objectives.

The Boxer drive module, including the chassis, engine and drivetrain, will be manufactured by KNDS UK in Stockport, sustaining critical armoured steel welding capability in Britain. The work is expected to create 100 skilled jobs at Rheinmetall’s Telford facility, support 100 jobs at KNDS Stockport and back 300 more across the UK supply chain.

The programme delivers on the Trinity House Agreement by strengthening UK-German collaboration and deepening interoperability between allied forces.

Defence Secretary John Healey MP said:

“This major investment is defence delivering for the battlefield and for Britain’s economy. By securing next-generation artillery with Germany, not only are we rearming to strengthen NATO against growing Russian aggression but also creating highly skilled jobs here in Britain. This is what we mean when we say defence is an engine for growth – investment in our security that powers new jobs across the country.”

German Federal Minister of Defence, Boris Pistorius, said:

“The RCH 155 will significantly enhance the artillery’s firepower, safety and flexibility. It is a vital element of modern artillery support. Together with the United Kingdom, we are demonstrating that we take interoperability within NATO seriously and are putting it into practice. At the same time, we are underlining the close defence cooperation between Germany and the UK. My British counterpart John Healey and I are keeping our word and are implementing the Trinity House Arrangement step by step. Joint exercises and training will bring our armed forces even closer together. This will deepen military cooperation in the long term and improve our operational readiness – for greater security in Europe.”

First deliveries are expected in 2028, with the aim of achieving a minimum deployable capability within this decade. The contract follows the £52 million Early Capability Demonstrator agreement signed in December 2025 and a £53 million Long Lead Item procurement contract earlier this year, supporting Rheinmetall’s large-calibre gun manufacturing facility in Telford.

Sheffield Forgemasters manufactures specialist steel parts for critical defence programmes and employs 720 skilled staff. The government invested more than £420 million of additional funding in the company last year, strengthening sovereign steelmaking capability for defence, including gun barrels and nuclear submarines.

The RCH 155 will replace the AS90 artillery systems granted in kind to Ukraine in 2023. The Archer artillery system is currently serving as an interim capability and will continue to do so until the RCH 155 enters service.

Visiongain Insight: The RCH 155 contract is both a battlefield modernisation programme and an industrial resilience measure. By tying artillery renewal to UK steel, domestic manufacturing, Stockport vehicle production and UK-German cooperation, the MOD is linking operational capability with supply chain depth and allied interoperability.

United States: Multi-year Procurement Seeks to Unlock Private Defence Investment

In the United States, Secretary of War Pete Hegseth has emphasised the role of multi-year contracts in strengthening the defence industrial base.

For suppliers, uncertain contract volumes have long made it harder to justify private investment in production capacity. The issue has become more acute as the US looks to rebuild missile stockpiles, expand interceptor output and address bottlenecks across the munitions supply chain.

Visiongain analysis reflects the pressure on advanced missile and air defence capacity. The global hypersonic missile defence systems market is estimated at US$1,754.3 million in 2026 and projected to grow at a CAGR of 10.0% during 2026-2036.

Secretary Hegseth stated:

“The department has helped stimulate more than 250 private investment deals in 39 states, in 180 cities, in 150 different companies, worth more than $50 billion,” he said. “This has resulted in 280 new and expanded facilities, more than 18 million new square feet of American manufacturing and more than 70,000 new American jobs.”

According to the department, that US$50 billion reflects private capital rather than direct government expenditure. Companies are investing from their own balance sheets because they have greater confidence in long-term demand and future returns.

Industry will also be watching for further use of the Defense Production Act this year, particularly following previous action around solid rocket motor component production.

Visiongain Insight: Multi-year procurement is becoming a demand signal as much as a contracting tool. For missiles, interceptors and other capacity-constrained segments, confidence over future volumes may determine whether suppliers commit private capital before shortages become operational risks.

United States: Low-Cost Missile Frameworks Target Affordable Strike Mass

The Department of War has reached framework agreements with Anduril, CoAspire, Leidos and Zone 5 to launch the Low-Cost Containerized Missiles/Munitions programme, or LCCM. A parallel agreement with Castelion will advance a more affordable hypersonic weapons pathway.

The move also points to a broader effort to widen the supplier base beyond traditional primes and bring more commercial entrants into high-volume weapons production.

The agreements are designed to expand US strike capacity by moving lower-cost missile concepts through rapid experimentation, assessment and future production contracting. The LCCM frameworks will culminate in a Military Utility Assessment by the sponsoring service components, with terms established for future firm-fixed-price production contracts.

The Department aims to procure more than 10,000 low-cost cruise missiles across these portfolios in three years, starting in 2027. The agreements include fixed material-unit costs for production lots from 2027 through 2029.

Once Castelion completes testing and validation, the Department is expected to award a two-year multi-year procurement contract for at least 500 Blackbeard missiles annually, with options to extend for up to five years. To support Castelion’s self-funded facility expansion, the Department is seeking the necessary authorisations and appropriations to purchase more than 12,000 Blackbeard missiles over five years.

Several vendors are expected to reach production capacity without direct Department investment. That points to a procurement model built around private capital, commercial speed and repeatable production of high-volume strike capability.

Visiongain Insight: The LCCM and Castelion agreements show how the US is trying to industrialise affordable mass. The focus is not only missile performance, but cost control, production tempo and supplier willingness to invest ahead of guaranteed government funding. If successful, this model could reshape how the US builds strike capacity for prolonged conflict.

Lithuania: Project Flytrap 5.0 Tests Counter-UAS Systems in Operational Conditions

Counter-UAS is moving quickly from standalone technology testing to allied operational integration.

The market pressure is clear. Visiongain estimates the global counter-UAV market at US$2,453.3 million in 2025, with a projected CAGR of 26.2% during 2025-2035, reflecting rising demand for detection, tracking, mitigation and operational integration.

Joint Interagency Task Force 401 recently supported the US Army’s assessment of emerging counter-unmanned aerial system capabilities during Project Flytrap 5.0, a training exercise currently underway in Lithuania.

Led by the Army’s V Corps, Project Flytrap 5.0 brings together US and allied forces, including the United Kingdom and Australia, alongside industry partners. The exercise assesses performance, interoperability, and tactical employment across more than 20 emerging counter-UAS systems in an operational environment.

This year also marks the first use of JIATF 401’s testing and evaluation standards, helping ensure performance data can be shared across services and other participating government agencies.

Army Col. Sam Kline, JIATF 401 response team director, said:

“Being here allows us to see firsthand not only how the technology is integrated but how it can be utilized in an operational environment,” said Army Col. Sam Kline, JIATF 401 response team director. “This investment provides testing data and operator feedback, enabling us to improve technology in real time and deliver top-tier counter-UAS capabilities to our warfighters.”

Visiongain Insight: Project Flytrap 5.0 shows how counter-UAS is moving from technology demonstration to operational integration. The priority is no longer just system performance, but standardised assessment, operator feedback and battlefield use across allied forces.

Market Outlook

Defence procurement reform is no longer a back-office issue. It is becoming a central driver of defence market growth.

The UK and United States are taking different approaches, but both are responding to the same structural challenge: military demand is rising faster than traditional acquisition systems can reliably deliver. Stockpile pressure, missile shortages, artillery replacement and counter-UAS requirements are forcing governments to rethink how quickly capability can move from requirement to production.

The market remains robust, supported by higher defence spending, renewed focus on readiness and growing demand for munitions, artillery, air defence and counter-UAS systems. However, procurement delays, production bottlenecks and uncertain contract volumes remain limiting factors for both governments and industry.

For suppliers, this creates a more demanding commercial environment. Delivery discipline, manufacturing readiness, cost control and willingness to invest private capital are becoming more important competitive factors. Established primes will need to demonstrate programme reliability, while smaller firms and new entrants may gain access where they can offer speed, innovation and credible production pathways.

Visiongain Insight: The next phase of defence market growth will favour suppliers that can turn demand into deployable capability. Companies with credible production capacity, disciplined execution and the confidence to invest ahead of guaranteed volume will be better positioned as procurement systems put greater weight on speed, resilience and delivery.

Related Visiongain Market Reports

Visiongain’s defence and security reports provide analyst-led data and forward-looking insight on procurement reform, industrial capacity, missile demand, counter-UAS requirements and execution risk.

• Small Drones Market Report 2026-2036
• Military Identification Friend or Foe Market Report 2026-2036
• Hypersonic Missile Defence Systems Market Report 2026-2036
• Military Artificial Intelligence (AI) Systems Market Report 2026-2036
• Advanced Materials in Aerospace and Defence Market Report 2026-2036
• Counter-UAV (C-UAV) Market Report 2025-2035

Press & Media Enquiries

For commentary, data requests or interview enquiries, please contact: press@visiongain.com