British Chancellor John Healey is actively considering a UK bid to join Canada’s proposed global defence bank, despite previous Treasury resistance and a recent rejection from his predecessor, as London weighs new international funding mechanisms to bolster military procurement and industrial capacity ahead of upcoming budget talks.
The United Kingdom is evaluating membership in the Canada-led Defence, Security and Resilience Bank (DSRB), a multilateral investment vehicle designed to help allied nations rearm against mounting security threats. Chancellor John Healey met with Canadian finance officials during a G20 summit and is slated for further discussions this week, positioning the UK to potentially join a founding cohort that already includes Ukraine and Turkey alongside several other nations.
The Financial Times, citing sources familiar with the situation, shared the news on Tuesday, reporting that British officials are evaluating a plan for the United Kingdom to become a member of the Canada-headed global defense bank. The proposal hints at a potential expansion of the UK’s defense cooperation on an international scale, aligning with Canada’s efforts to bolster global defense strategies. However, Reuters has not independently confirmed the Financial Times’ report.
Treasury officials stressed that no decision has been made.
Rachel Reeves and Previous Treasury Resistance
The deliberations mark a sharp turn from the stance of Healey’s predecessor, Rachel Reeves. As chancellor, Reeves previously rejected the DSRB concept. Treasury officials had expressed concern that the institution would not adequately address the UK’s specific defence procurement challenges, focusing instead on lending to smaller defence firms in countries with lower credit ratings. The UK has maintained a AA credit rating since 2016.
Reeves had instead announced at the Nato summit in Ankara in July that the UK would join the Netherlands, Finland and Poland to launch a new lender called the Multilateral Defence Mechanism. She said the MDM would help the UK with procurement – saving the UK as much as 20% – and stockpiling, which would give taxpayers better value for money while allowing government to borrow at a low rate to fund defence. The UK has committed an initial £600m to the new lender.
The former chancellor had called for the two rival international defence financing schemes to merge, arguing that it made sense for countries to only fund one institution that could work for all nations. In addition to overlaps with existing initiatives, there were also understood to be concerns in the Treasury over the amount of capital that countries would need to commit while public finances are strained.
François-Philippe Champagne and G20 Summit Talks
While Reeves previously called for rival international defence financing schemes to merge into a single institution, Healey has long been a proponent of multilateral funding mechanisms. When he was defence secretary, Healey was understood to have been a strong advocate for keeping UK observers present at Canadian prime minister, Mark Carney’s, defence bank talks, despite resistance from the Treasury, which wanted to shut off those international discussions.
Healey met the Canadian finance minister, François-Philippe Champagne, twice at a G20 summit in North Carolina two weeks ago. They are due to meet again in the UK this week, when the two men are – according to sources – likely to discuss the defence bank, and both are expected to be at EU finance minister talks in Dublin later this week. Canada is understood to have already formally invited the UK to become a founding member of the bank, along with eight other countries including Ukraine and Turkey.
The DSRB has been seeking to raise around €100bn, which it would use to lend at low cost to governments and contractors for defence projects. It would also offer guarantees for lenders financing smaller firms seen as riskier borrowers. Proponents say the bank could help the UK fund defence projects at lower cost and play a role in boosting defence investment by using financial leverage separate from the balance sheets of already indebted nations, though it would need additional sovereign backing beyond current commitments to become a major player.
For the UK, participation carries significant financial commitments. The UK’s initial capital contribution would be between £1bn and £2bn over three years, a demanding outlay at a time when public finances remain heavily strained.
“We are fully committed to working alongside our international partners to scale defence industrial capacity. We are working closely with our Canadian allies on ensuring the Multilateral Defence Mechanism and Defence Security Resilience Bank are complementary.”
Government spokesperson
Mark Rutte and Nato Secretary General Visit
Government representatives emphasized that officials are working closely with Canadian allies to ensure both initiatives operate effectively together as international pressure mounts across European defence lines. Healey resigned as defence secretary in June, accusing Keir Starmer and his chancellor, Reeves, of putting the country’s security at risk because the defence spending package fell £13bn short of what he argued was required. As chancellor, he is expected to avoid setting a target date for reaching 3% defence spending in next month’s budget and instead is planning to set out a pathway to reaching the goal at the 2027 spending review.
The internal government debate unfolds against a volatile geopolitical backdrop in Europe. Before he cancelled commitments due to the death of his father, Prime Minister Andy Burnham had been due to meet Canada’s Prime Minister Mark Carney in the UK on Wednesday. Nato Secretary General Mark Rutte is also travelling to the UK for his first meeting with the prime minister. He is giving a speech in Oxfordshire, where he is expected to say the UK is serious about security
and praise the country’s efforts supporting Ukraine. He will also say that Nato will not be intimidated by Russia's campaign of hostile actions.
Russia wants to stop us helping Ukraine – but their actions will only lead us to do more for Ukraine.
It comes after Nato forces shot down a drone over Lithuania in the latest security scare on the alliance’s eastern flank, where tensions remain high amid Russia’s full-scale invasion of Ukraine. And on Tuesday Denmark also accused a Russian warship of firing two emergency flares at one of its helicopters while it was tracking the vessel in the Baltic Sea.
Healey faces critical fiscal decisions ahead of next month’s budget. Whether the UK ultimately formalizes its founding membership in the Canadian-led bank depends heavily on the outcome of ministerial talks scheduled in the UK and Dublin this week.