RE: ✔️29 Dec 2025 15:41
City prepares to pour cash into defence as threat from Russia rises - TOM SAUNDERS 29 Dec 25
The City of London is preparing to plough more money into defence investment as Vladimir Putin’s Russia poses a growing threat to Europe.
Almost two-thirds of financial services bosses said they expect investment in Britain’s military capabilities to increase next year, according to a survey carried out by KPMG.
Within that, more than a quarter of respondents said they expected the amount of money spent on defence to rise “much more” over the next 12 months.
It marks a dramatic shift in the City’s attitude towards the defence industry after a decades-long boom in so-called environmental, social and governance (ESG) investment, whose proponents claimed backing defence was unethical.
Karim Haji, the global and UK head of financial services at KPMG, said an increase in defence spending by the Government in response to growing geopolitical threats made it unviable for the City to shun military investment.
He added: “These findings point to a growing recognition that national security, geopolitical alignment and market integrity are now inseparable from the stability of the finance sector.”
The findings come amid mounting fears about the threat posed by Russia to the West. Mark Rutte, the head of Nato, warned earlier this month that Russia could attack a country in the bloc within the next five years.
“Russia is already escalating its covert campaign against our societies,” Mr Rutte said in a speech in Germany. “We must be prepared for the scale of war our grandparents or great-grandparents endured.”
Earlier this month, Putin said Russia was not planning to go to war with Europe, but it was ready “right now” if it was threatened to do so.
Bosses responding to KPMG’s survey named investing in defence as their number one priority over the next year, ahead of preserving central bank independence in tackling inflation and stronger regulatory cooperation between the UK and US.
Almost four in 10 said greater investment in national security was crucial to safeguarding financial stability next year.
Bosses also raised concerns about the risks surrounding private credit, or “shadow banking”, where non-banking sources such as hedge funds and financiers hold trillions of dollars of loans but keep them secret from regulators.
More than a quarter said that regulation and oversight of the private credit was also a key concern, while 22pc said that greater scrutiny of non-bank financial institutions was needed.
Mr Haji added: “What also stands out is the growing focus on private credit and non-bank finance as potential fault lines in a crisis. These markets have expanded rapidly and now sit at the centre of corporate funding, yet they are still less transparent and less tested in extreme stress than the traditional finance system.”
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