Chancellor Rachel Reeves has issued a direct order to cabinet ministers: award government contracts in four critical industries to British firms, expressing clear frustration that too much public money has been funnelled abroad. In a letter co-signed by Cabinet Office minister Chris Ward and sent last week, Reeves told every secretary of state responsible for a spending department to “buy British” wherever possible, adding that she was disappointed they were not already doing so. The Treasury and Cabinet Office will now monitor billions of pounds’ worth of contracts in shipbuilding, steel-making, energy and artificial intelligence, with the power to override ministerial decisions if necessary.
“We should all want to see more businesses grow and prosper and create good, skilled jobs and apprenticeships here in Britain,” Reeves wrote. “Every secretary of state can and must lead this agenda within their departments if we are to deliver the change the public expect.” She added: “Therefore, it is disappointing that we are still seeing too many government contract awards where this is not happening. We have instructed officials to take further steps to ensure your departments act in the wider national interest rather than solely focusing on narrow operational priorities.”
Her intervention targets four sectors already identified by Whitehall as critical: shipbuilding, steel, energy infrastructure and artificial intelligence. Reeves is understood to be particularly unhappy that a series of high-profile contracts have either been awarded to foreign bidders or put out to open tender instead of being given directly to a British contractor. Among the decisions that have drawn her ire is a £200 million contract for navy support vessels, awarded to the Dutch shipbuilder Damen as part of a larger deal with Serco, the prime contractor, for 24 vessels to enhance the Royal Navy’s auxiliary fleet. A £9 million contract to refit the research ship Sir David Attenborough went to the Danish shipyard Orskov – a decision defended by UK Research and Innovation, which said it followed an extensive competitive bidding process. The chancellor is also said to be disappointed that a £1.9 billion contract to upgrade the Faslane shipyard, which services Britain’s nuclear submarines, could go abroad through competitive tender. And she is uneasy about the possibility that turbines at a major North Sea offshore windfarm could be manufactured by the Chinese company Mingyang.
The decisions have triggered protests from some of Britain’s largest unions. Louise Gilmour, secretary of GMB Scotland, said of the Faslane contract: “It is hard to imagine another country in the world being so willing to send such work abroad … It is beyond time the MoD started defending our workers and their communities.” Gilmour had earlier described the prospect of the Faslane upgrade going overseas as a “betrayal” of Scottish workers, underlining its importance for national security and industrial capability. The union also pointed out that the navy support vessels could have been built in UK yards such as Ferguson Marine.
However, others in government argue that allowing companies to bid competitively secures the best products for the lowest price, and that awarding contracts directly to preferred firms is likely to push costs up for taxpayers. Aides to Defence Secretary John Healey insist he is as committed as the chancellor to buying from UK companies, noting that he announced new funding last week to help British defence firms grow. They point out that the Faslane deal has not yet been finalised, and that the £200 million naval support contract was actually awarded to Serco, the prime contractor, which then subcontracted Damen. Serco holds a separate contract valued at approximately £850 million over ten years for in-port maritime services for the Royal Navy, including the procurement of the 24 vessels. Damen has also secured a contract for a trailing suction hopper dredger for UK Dredging – a subsidiary of Associated British Ports – to be built in Vietnam, a move that has drawn criticism over its impact on domestic industry.
National security and economic pressures
Allies of the chancellor say her irritation is directed not at individual ministers but at what she sees as the “inertia” of civil servants following rules that prioritise cost over contractors’ nationalities. The tendency to grant contracts abroad, they argue, risks undermining British national security, particularly in the energy sector, where experts have expressed concern that China could gain a level of control over critical infrastructure. Mingyang’s potential involvement in a North Sea offshore windfarm follows earlier scrutiny of Chinese-made components in UK infrastructure, including an investigation into software in Chinese-built buses.
In March, Chris Ward said he would issue guidance clarifying that the government regards shipbuilding, steel, artificial intelligence and energy infrastructure as critical for national security. Ministers argue that such a designation will allow departments to award contracts directly to companies rather than running a competitive bidding process. The 2023 Procurement Act – which came into effect on 24 February 2025 – already gives ministers the power to block companies from bidding for certain contracts if they are deemed a national security risk. The Act also changed the basis on which contracts are awarded from the “Most Economically Advantageous Tender” to the “Most Advantageous Tender,” providing greater flexibility to consider broader public benefits, including nationality and industrial impact. However, government insiders acknowledge that the promise of new guidance has not been enough to change how Whitehall spends money, and hope that Reeves’s warning will put “rocket boosters” under the policy.
In her letter, the chancellor said she would issue further guidelines to government accounting officers instructing them to take contractors’ nationality into account alongside cost. She warned: “We look forward to confirmation that your departments are complying with the new guidance when it is issued later this summer. Each department will be held to account on the progress being made.” Government insiders said this would involve the Cabinet Office reviewing individual contracting decisions and, if necessary, “calling in” those over which officials had concerns, potentially overriding them.
The directive also comes against a backdrop of acute economic vulnerability. The UK is heavily reliant on imported energy, and the ongoing Iran war has sent oil and gas prices soaring. The International Monetary Fund warned earlier this year that the UK would suffer the biggest hit to growth of any developed economy as a result of the conflict. The IMF revised its UK growth forecast for 2026 upwards from 0.8% to 1% after stronger-than-expected first-quarter GDP figures, but acknowledged the continued risks posed by the war. Rising inflation linked to higher energy costs has intensified cost-of-living pressures, prompting Reeves to announce a package of measures – including a temporary VAT cut to 5% on summer attractions and children’s meals, free bus travel for children in England during August, and a delay in fuel duty increases.
Political backdrop
Reeves’s letter was sent last week as she attempted to stamp her authority over a restive party, many of whose members expect a change of prime minister within months. The move coincides with a wider battle over who should be chancellor if Keir Starmer is replaced during this parliament. Allies of both Reeves and Energy Secretary Ed Miliband have been openly positioning their preferred candidate for the keys to No 11. Miliband, who has reportedly been advising Andy Burnham on fiscal discipline, is seen by some as having ambitions for the chancellorship himself. Burnham is standing to be the MP for Makerfield, a move interpreted as a step towards a future leadership bid.
Over the past few days, Reeves has also become embroiled in a public spat with supermarkets over their prices, launched her own TikTok account, and announced summer cost-of-living measures. Her allies insist her irritation over procurement is not about personal rivalries but about Whitehall’s failure to prioritise British industry and national security. A government spokesperson said: “For the first time, procurement of shipbuilding, along with steel, AI and energy infrastructure, will be recognised as critical for national security. We will also issue new guidance prioritising contracts for British business where necessary to protect our national security.”
