Ministry of Defence Annual Report and Accounts 2024–25 HC 1130 FRONT COVER IMAGE: UK national commemorative 80th Anniversary of D-Day event on 5th June 2024. Representatives from the Royal Marines, the Army, and the Royal Air Force. Ministry of Defence Annual Report and Accounts 2024–25 For the year ended 31 March 2025 Accounts presented to the House of Commons pursuant to section 6(4) of the Government Resources and Accounts Act 2000. Annual Report presented to the House of Commons by Command of His Majesty. Ordered by the House of Commons to be printed on 4th November 2025. This is part of a series of departmental publications which, along with the Main Estimates 2024-25 and the document Public Expenditure: Statistical Analyses 2024, present the government’s outturn for 2024-25 and planned expenditure for 2025-26. HC 1130 © Crown copyright 2025 This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned. This publication is available at https://www.gov.uk/official-documents Any enquiries regarding this publication should be sent to us at: [email protected] ISBN 978-1-5286-5657-3 E03343966 11/25 Printed on paper containing 75% recycled fibre content minimum Printed in the UK by the HH Associates Ltd on behalf of the Controller of His Majesty’s Stationery Office. MOD Annual Report and Accounts 2024–25 iii Contents Performance Report .................................................................. 1 Foreword by Secretary of State for Defence ................................................................................ 2 Introduction from the Permanent Secretary ................................................................................. 4 Defence Operating Model ............................................................................................................ 6 Defence Reform ........................................................................................................................... 7 Summary of Principal Risks ......................................................................................................... 9 The Strategic Defence Review ................................................................................................... 10 Support to Ukraine .................................................................................................................... 12 Financial Performance Summary ............................................................................................... 14 Performance Analysis ............................................................... 21 A more lethal, integrated force ready and able to deter, fight and win today and in the future, and a resilient nuclear deterrent ..................................................................................... 22 An organisation that takes a NATO first approach by stepping up our commitments for European security, and extends our influence beyond the ability to fight through diplomacy and development of other nations’ capacity to defend themselves .......................................... 30 A thriving UK defence industry that is resilient and scalable – an engine for growth, jobs and innovation across every region and nation of the UK ......................................................... 41 An organisation that delivers value for money for the UK taxpayer, delivers capabilities faster and is adaptable to future change ................................................................................... 46 A highly engaged organisation that recognises people are fundamental to UK Defence, enables everyone to fulfil their potential and takes a whole of society approach to the security and defence of the nation ............................................................................................. 49 The Climate and Environment .................................................................................................... 57 Task Force on Climate-related Financial Disclosures (TCFD) .................................................... 62 Accountability Report ............................................................... 71 Corporate Governance Report .................................................................................................. 72 The Remuneration and Staff Report .......................................................................................... 96 The Parliamentary Accountability and Audit Report ............................................................... 123 The Certificate of the Comptroller and Auditor General to the House of Commons .............. 142 The Report of the Comptroller and Auditor General to the House of Commons .................... 157 Financial Statements .............................................................. 159 Financial Statements ................................................................................................................ 160 Notes to the Accounts ............................................................................................................. 166 Annexes .................................................................................. 231 Performance Report For the year ended 31 March 2025 HMS Sultan Guard present arms at the Remembrance Service in Gosport. Performance Report 2 MOD Annual Report and Accounts 2024–25 Foreword by Secretary of State for Defence The threats that we now face are more serious and less predictable than at any time since the Cold War, including war in Europe, growing Russian aggression, new nuclear risks, and daily cyber-attacks at home. Our adversaries are working more in alliance with one another, while technology is changing how war is fought. The UK and our European allies have been challenged to step up on European security. We are in a new era of threat, which demands a new era for UK defence. This annual report covers the period of the end of the last government and the first 8 months of this one. This report includes details of an Afghan data incident affecting applicants to the ARAP scheme, and its predecessor the Afghanistan Locally Employed Staff Ex-Gratia Scheme. While this took place under the previous Government in February 2022 and was discovered in August 2023, the incident and response were subject to a super-injunction until I asked for this to be lifted in July 2025. This decision followed the Rimmer review I commissioned in January 2025. We are now able to report the details of this incident and to invite full scrutiny of the response, which included the relocation of some individuals on the list considered to be at highest risk. Since the General Election, we have demonstrated that we are a Government dedicated to delivering for Defence. On 25 February 2025, the Prime Minister announced the largest sustained increase to defence spending since the end of the Cold War—rising to 2.6% of GDP by 2027, and the ambition to 3% in the next Parliament. We have already boosted the defence budget by £5Bn this year. We have stepped up support for Ukraine as Russia’s unprovoked and illegal full-scale war in Ukraine moves into its fourth year. We have awarded our Service personnel the biggest pay rise in over 20 years. We have signed the historic Trinity House Agreement with Germany, establishing an enduring foundation for our defence co-operation. We have bought back thousands of military homes into public ownership to improve housing for forces families and save UK taxpayers billions. We have set new targets to tackle the recruitment crisis and introduced Defence’s first ever Tri-Service recruitment contract. We have made it easier for veterans to access essential care and support under the new VALOUR system and passed through Parliament the Armed Forces Commissioner Act 2025 to improve service life. We have also delivered a first-of-its-kind Strategic Defence Review (SDR), which was launched by the Prime Minister within two weeks of the General Election. It was externally led working with the Ministry of Defence, to harness the best expertise from inside and outside Government to produce the first root-and-branch review of UK Defence in 25 years. The SDR signifies a landmark shift in our deterrence and defence: moving to warfighting readiness to deter threats and strengthen security in the Euro-Atlantic. This will be achieved by the UK leading within NATO and taking on more responsibility for European security. Our defence policy is ‘NATO First’ but not ‘NATO only’—and we remain committed to our allies and partners across the world, as our security is closely connected. The SDR is the Plan for Change for Defence and sets the strategic vision for UK Defence through to 2035 and beyond. On Day 1 in Government, we also launched the Defence Reform programme—the deepest defence reforms for 50 years. The SDR strongly endorses this programme of change and recognises that one cannot succeed without the other. From 1 April 2025, we established a new Military Strategic Headquarters (MSHQ), set up a new National Armaments Director (NAD) to drive our defence industrial strategy, and gave new powers to the Chief of the Defence Staff (CDS) to command the Service Chiefs for the first time. We have also ended the Levene Reforms and have replaced ten budget holders with four new budget areas for tighter budget control. These changes will strengthen Defence with stronger leadership, clearer accountability, faster delivery, less waste, and better value for money. Defence is now central to both our national security and our economic growth. At the heart of this investment lies our total commitment to operate, sustain, and renew our nuclear deterrent, which is deployed every minute of every day to protect our people, nation, and way of life and sends the ultimate warning to anyone who seeks to do us harm. This focus on delivery could not have been possible without the amazing people who work in UK defence – civilian and military alike so I wanted to say a huge ‘thank you’ to everyone for all their hard work over the past year. Performance Report 4 MOD Annual Report and Accounts 2024–25 Introduction from the Permanent Secretary On 4 July 2024 our country transitioned to a new government, and we welcomed a new ministerial team to the Ministry of Defence. The Secretary of State subsequently made clear the Government’s mission for Defence: to make Britain secure at home and strong abroad. We have supported the externally-led Strategic Defence Review (SDR), which was published on 2 June 2025 and sets out a vision that by 2035 the United Kingdom will be a leading tech-enabled power, with an Integrated Force that deters, fights and wins through constant innovation at wartime pace. To deliver the intentions of the SDR, the Secretary of State has challenged Defence to speed up decision making, focus on outcomes and rapidly deliver cutting edge capabilities to the Armed Forces while achieving the best value for taxpayers. On 1 April 2025, the Secretary of State announced a significant step in these reforms: establishing a new Military Strategic Headquarters and National Armaments Director Group; and strengthening the Department of State and Defence Nuclear Enterprise. We will work to fully establish the new structures and ways of working through 2025-26. Defence has managed the Spending Review 2025 settlement and various difficult in-year savings measures. The Spring Budget 2025 provided a £2.2 billion increase for the Department for 2025-26 and a settlement to increase NATO qualifying defence spending to 2.6% of GDP by April 2027. This is welcomed, as we continue to commit £3 billion in military support to Ukraine each year. We have delivered a wide range of capabilities including anti-tank weapons, artillery ammunition, multiple launch rocket systems, air defence systems with associated ammunition and missiles, armoured and protected vehicles, Storm Shadow and additional Brimstone missiles, uncrewed systems and components. More than 60,000 Ukrainian troops have been trained by the British Army and its 13 partner nations through Operation INTERFLEX. Front and centre of the SDR was a commitment to NATO First, which remains the most important commitment for the British Armed Forces, beginning with the delivery of the Nuclear Deterrent and encompassing Royal Navy anti-submarine operations in the North Atlantic, Royal Air Force policing missions, and the British Army’s commitment to Europe’s eastern flank. Britain and our allies have taken a broad range of actions in response to conflict and instability in the Middle East, including providing support to the counter-Da’esh coalition, assisting the development of the Lebanese Armed Forces, and participating in the Combined Maritime Force in Bahrain. Working closely with the Kingdom of Jordan, the Royal Air Force undertook eleven airdrops to deliver more than 100 tonnes of aid to the people of Gaza while a Royal Fleet Auxiliary vessel provided afloat support to the US floating pier. We have acted decisively to uphold Freedom of Navigation and respond to attacks on international shipping in the Red Sea, including participation in the US-led Operation Prosperity Guardian. Since January 2024, the Armed Forces have conducted six rounds of proportionate strikes against Houthi targets to degrade their capabilities. All these activities are possible due to the talent and skills of our military and civilian personnel throughout Defence, with the support of our families and in conjunction with the defence industry. As part of the Flexible Workforce Programme, we are introducing zig-zag career structures to provide more choice and flexibility for our people and to better plan and manage workforce needs. Through the Raising our Standards work, we will ensure all staff know and demonstrate expected behaviours and maintain the highest professional standards within Defence, which is key to a One Defence culture. Finally, for veterans, VALOUR is a new £50 million commitment to establish the first-ever country-wide approach to support, fostering the entrepreneurial spirit of military charities to better connect local and national services. David Williams CB Permanent Secretary for the Ministry of Defence Defence Operating Model The Ministry of Defence (MOD) works to support a secure and prosperous United Kingdom. We protect our people, territories, values, and interests at home and overseas, through strong Armed Forces and in partnership with allies, to ensure our security, support our national interests and safeguard our prosperity. In the period since the election, Defence has focused on delivering: • A more lethal, integrated force ready and able to deter, fight and win today and in the future, and a resilient nuclear deterrent. • An organisation that takes a NATO first approach, by stepping up our commitments for European security, and extends our influence beyond the ability to fight through diplomacy and development of other nations’ capacity to defend themselves. • A thriving UK defence industry that is resilient and scalable – an engine for growth, jobs and innovation across every region and nation of the UK. • An organisation that delivers value for money for the UK taxpayer, delivers capabilities faster, and is adaptable to future change. • A highly engaged organisation that recognises people are fundamental to UK Defence, enables everyone to fulfil their potential and takes a whole of society approach to the security and defence of the nation. In 2024-25, Defence was led at the official level by the Permanent Secretary, who is the Secretary of State’s principal civilian adviser on Defence, with primary responsibility for policy, finance and planning and is the Departmental Accounting Officer. Reporting to the Head of the Civil Service, the Permanent Secretary is a member of the Defence Council and Defence Board. The Second Permanent Secretary worked closely with the Permanent Secretary on all aspects of the Department’s leadership. This post was removed as part of Defence Reform with effect from 1 April 2025. Further information about changes under Defence Reform, made since the reporting date, are set out in the next section. The Chief of the Defence Staff is the professional head of the Armed Forces, the principal military adviser to the Prime Minister and Secretary of State for Defence, and the lead military voice on the Defence Board. The Vice Chief of the Defence Staff deputises for the Chief of the Defence Staff and has responsibility for running the Armed Forces aspects of defence business, principally through the central staff. Defence Reform Following the election in July 2024, the Secretary of State for Defence, the Right Honourable John Healey MP, launched reforms to enable UK Defence to match increasing threats, tackle waste and strengthen the Armed Forces. Signalled as ‘a new era for Defence’ and the deepest reforms for 50 years, “Defence Reform” is fundamentally changing the way Defence operates, speeding up decision making, focusing on outcomes, rapidly delivering cutting edge capabilities to UK Armed Forces while achieving the best value for taxpayers. It will change the way Defence operates. It will ensure that we are ready for the challenges ahead, including delivering the Strategic Defence Review, ensuring value for money from the budget settlements and setting Defence at the heart of future security and success of the UK. On 1 April 2025, the Secretary of State announced a significant step in reforms: establishing a new Military Strategic Headquarters and new National Armaments Director Group; and strengthening the Department of State and Defence Nuclear Enterprise. Since 1 April 2025, the Permanent Secretary leads a more agile Department of State. This area is responsible for providing policy advice and clear strategic direction to ensure that Defence is focused on outcomes and delivery. It contains a streamlined set of Director Generals, reporting to the Permanent Secretary, focused on: strategy and transformation; people; policy; finance; science and safety. In line with wider Civil Service Reform, this area will be lean and highly skilled, unleashing the exceptional capabilities within Defence by making the systems and processes more efficient and empowering. As part of this phase of changes, the post of the Second Permanent Secretary was removed. The Chief of the Defence Staff commands both the Military Strategic Headquarters and the Service Chiefs. The Military Strategic Headquarters acts as the focal point for the design of the integrated force, to improve warfighting readiness and lethality, and coordinates the strategic planning of UK Defence activity worldwide. The Military Strategic Headquarters will support the journey from a ‘joint’ to an ‘integrated’ force that better harnesses the five warfighting domains of maritime, air, land, cyber, and space. The National Armaments Director will deliver cutting-edge capability to UK Armed Forces, swiftly and to cost. To do so, the National Armaments Director will lead a reformed end-to-end defence procurement system and make Defence an engine for economic growth in every corner of the UK. The new structure will enable collaboration between teams delivering the national ‘arsenal’ and the Government’s Defence Industrial Strategy into a single group. It will enable collaboration by bringing together: Defence Equipment & Support, Defence Infrastructure Organisation, Defence Science and Technology Laboratory, Defence Digital, and Defence Support, along with roles focused on international collaboration and exports, supporting UK Defence Industry. These roles and organisations will work together, alongside industry, academia, international allies and partners to develop, deliver and support innovative, world-beating military capabilities. The Chief of Defence Nuclear (CDN) is responsible for cohering across the Defence Nuclear Enterprise (DNE), which comprises the organisations that operate, maintain, renew and sustain the UK’s nuclear deterrent and brings together the core organisations of the Defence Nuclear Organisation (DNO), the Royal Navy, UK Strategic Command, the Submarine Delivery Agency (SDA), and AWE Nuclear Security Technologies (“AWE”). The financial nuclear ringfence ensures nuclear spending is prioritised and allows a strong focus on delivery and outcomes. Under Defence Reform, the Chief of Defence Nuclear will act as the clear point of accountability for the ringfence, working closely with industry and the Military Strategic Headquarters finance teams to ensure effective management. Responsibilities of senior officials and military personnel under Defence Reform: - The Department of State (DoS), led by the Secretary of State and ministerial team, supported by the Permanent Under-Secretary of State (PUS) who is: The lead policy adviser, providing the vision, strategy, and departmental plan; The Principal Accounting Officer, accountable to Parliament for ensuring Defence operates within budget and delivers value for money. - The National Armaments Director Group (NAD Group), led by the National Armaments Director (NAD) who is: Responsible for the readiness of the national 'arsenal' to meet the requirements of defence plans; Responsible for shaping and delivering acquisition reform and an industrial strategy to boost the UK's defence industry. - The Military Strategic Headquarters (MSHQ), led by the Chief of the Defence Staff (CDS) who is: The professional head of the UK's Armed Forces, accountable for their readiness to fight and win; In formal command of Service Chiefs; Senior Military Adviser to the Prime Minister and the Secretary of State for Defence. - The Defence Nuclear Organisation (DNO), led by the Chief of Defence Nuclear (CDN) who is: The focal point, sponsor, and Additional Accounting Officer for the Defence Nuclear Enterprise (DNE), from strategy to delivery; The DNE is the partnership of organisations that operate, maintain, renew, and sustain the UK's nuclear deterrent. The Principal Accounting Officer remains accountable to parliament for Defence Spending. In 2025-26, he will delegate multi-year budgets to each Area, in line with HM Treasury’s departmental spending settlement, with four new budget holders, one for each of the areas. Funding and spend will be categorised into Invest, Readiness and Operate, with the National Armament Director holding the Invest budget and the Military Strategic Headquarters responsible for the Operate budget and the Readiness budget. Work continues to fully establish the new structures and ways of working to improve the efficiency of Defence. 2025-26 will be a transitional year for Defence, with quarterly reform programme milestones. New processes will be tested and refined, simplifying and removing duplication wherever possible. Defence Reform is a Parliament long programme. Summary of Principal Risks Defence implements a risk framework that enables risk to be managed at all levels of the organisation ranging from Defence Board held risks (principal risks) through to risks supporting the procurement and in service support to the Armed Forces. At the strategic level, Defence identifies its principal risks against core ministerial commitments and Defence Outcomes, ensuring that the risks that could directly affect the delivery of Defence strategic objectives can be effectively managed through appropriate governance and investment. The Department’s principal risks are overseen by the Defence Board and supported by risk management at all levels of the organisation. Risk detail is withheld for matters of national security but principal risks that are currently monitored include: • The capacity and skills of our workforce • Transforming the Force through science, innovation and technology • Our ability to keep people safe and secure • Increasing our cyber and wider resilience • Creating an alliance with industry and resilience in the supply chain • Building and maintaining robust and effective relationships with our partners • Adapting to the impacts of climate change The Defence Board, Executive Committee and Defence Nuclear Board are the key components of the enterprise governance that ensures that strategic risks are mitigated and that the Department’s strategy is effectively implemented. The Governance Statement contains more information on our internal controls and risk management approach, including the activities delivered through the year to reduce risk in our key areas. The Strategic Defence Review In July 2024, the Prime Minister launched a ‘root and branch’ Strategic Defence Review (SDR) to ensure the United Kingdom is both secure at home and strong abroad, now and in the years to come. The purpose of the SDR was to determine the roles, capabilities and reforms required by UK Defence to meet the challenges, threats and opportunities of the twenty-first century, deliverable and affordable within the resources available to Defence. The SDR was led by three external reviewers, who selected a small Defence Review Team (DRT) to support their work. The DRT comprised senior experts from inside and outside Defence, working closely with other Government Departments, including HM Treasury. The SDR involved and received inputs from other Government Departments and agencies, in areas where they support UK Defence. It consulted widely, 1,700 individuals, political parties and organisations submitted over 8,000 responses, 200 companies provided written contributions, over 150 senior experts took part in the review and challenge panels and nearly 50 meetings took place between the reviewers and our senior military figures. Aligned to the Government’s clear plans to spend 2.6% of GDP on defence by 2027, and with an ambition to spend 3% in the next parliament subject to fiscal and economic conditions, the SDR sets a vision that by 2035 UK Defence will be a leading tech-enabled defence power, with an Integrated Force that deters, fights and wins through constant innovation at wartime pace. The enduring and mutually reinforcing roles that Defence must fulfil to the deliver the outcomes within the resources available are: • Defend, protect and enhance the resilience of the UK, its Overseas Territories, and Crown Dependencies. • Deter and Defence in the Euro-Atlantic. • Shape the global security environment. The two further enabling roles that are fundamental to delivery of the core roles are: • Develop a thriving, resilient defence innovation and industrial base. • Contribute to national cohesion and preparedness. In support of these roles and to achieve this 2035 vision the SDR sets out the following new ambitions for Defence: • ‘NATO first’ – stepping up on European security by leading in NATO, with strengthened nuclear, new tech and updated conventional capabilities. • Move to warfighting readiness – establishing a more lethal ‘integrated force’ equipped for the future and strengthened homeland defence. • Engine for growth – driving jobs and prosperity through a new partnership with industry, radical procurement reforms, and backing UK businesses. • UK innovation driven by lessons from Ukraine – harnessing drones, data and digital warfare to make our Armed Forces stronger and safer. • Whole-of-society approach – widening participation in national resilience and renewing the Nation’s contract with those who serve. The SDR was published on 2 June 2025 with the Government endorsing the vision and accepting all 62 recommendations in the report. The Defence Investment Plan To deliver the SDR vision we will develop a new Defence Investment Plan. The Defence Investment Plan, which supersedes the Defence Equipment Plan, will be completed by Autumn 2025. The plan will cover the scope of the defence programme over the next decade, from people and operations to equipment and infrastructure. The plan will be deliverable, affordable and will ensure our frontline forces get what they need when they need it. The plan will enable flexibility to seize new technology opportunities and maximise the benefits of defence spending to grow the UK economy. We will unlock nearly £6Bn of new savings over the course of this Parliament through efficiency and productivity savings, civilian workforce changes, and structural simplification. We will publish a Defence Reform and Efficiency plan alongside the Defence Investment Plan, which will provide further detail of these efficiencies and savings. Support to Ukraine As Russia’s unprovoked and illegal full-scale war in Ukraine moves into its fourth year, the UK remains resolute and a leader in the support offered to Ukraine in response. The Ministry of Defence works closely with allies and partners to ensure the provision of military support: enabling Ukraine to better defend itself; and demonstrating Ukraine’s right as a sovereign, independent and democratic state. UK support to Ukraine since Russia’s full-scale invasion in 2022: • £7.8Bn of UK military assistance since Russia's full-scale invasion in 2022 • +£2.26Bn loan to bolster Ukrainian defence capabilities • £1.5Bn+ contributed to the International Fund for Ukraine to fund critical capabilities • Approx. 400 capabilities delivered to Ukraine including through rapid procurement with defence industry • 55,000+ Ukraine personnel trained in the UK under Operation INTERFLEX • 20+ types of equipment including bespoke air defence, electromagnetic warfare, and anti-armour systems The UK committed £3Bn in military spending to Ukraine in 2024-25. We have delivered a wide range of capabilities to help the Armed Forces of Ukraine defend their territory. In the past year this has included: anti-tank weapons, artillery ammunition, multiple launch rocket systems, Air Defence systems with associated ammunition and missiles, armoured and protected vehicles, Storm Shadow, additional Brimstone missiles, uncrewed systems and components. Task Force HIRST was established in December 2023 in collaboration with the Department for Business and Trade to develop closer government and defence industrial cooperation with Ukraine. A Framework Agreement on Defence Material Cooperation between UK Defence, Ukraine’s Defence and the Ministry of Strategic Industries was signed on 12 April 2024 allowing the UK and Ukraine to develop projects together, and for the UK to procure direct from UK defence industry on Ukraine’s behalf. The UK/Ukraine Defence Credit Support Treaty, signed on 19 July 2024, allows Ukraine access to £3.5Bn of export finance guarantees to secure those contracts. Since its establishment, Task Force HIRST has delivered: • a contract with BAE Systems to produce 105mm and 155mm gun barrels for Ukraine. Sheffield Forgemasters is a key sub-contractor producing initial forgings in the UK, re-establishing a long-dormant UK industrial capability. The barrels will be finished by an industrial partner in Ukraine. • A £1.6Bn deal with Thales UK to supply Ukraine with more than 5,000 advanced air defence missiles. Thales will work with a Ukrainian partner in the production of a launcher and command and control vehicles in Ukraine, representing an ever-increasing level of collaboration between our respective industrial bases. • A series of contracts with UK industry to provide maintenance, repair and overhaul of UK-provided land equipment and some of the former Soviet Union equipment still operated by Ukraine. The maintenance, repair and overhaul of vehicles and equipment in Ukraine ensures that kit can be returned to operational use on the Front Line as quickly as possible. These commercial frameworks are open to international collaboration through the International Fund for Ukraine (IFU), for example, Sweden has used them to fund the maintenance of the Archer artillery systems they have provided to Ukraine, thereby scaling up the repair and maintenance facilities in-country. Task Force HIRST has also delivered a series of trade missions to Kyiv to initiate, develop and deepen UK/Ukrainian defence industry relationships. By the end of 2024-25 the UK had led the international trade mission, together with the Netherlands and Norway. Trade Missions support the UK’s economy and jobs, build Ukraine’s own industrial resilience and are a demonstration of the UK’s 100-year partnership with Ukraine. Through the IFU, contracts worth over £1.5Bn have now been placed for a range of equipment including: uncrewed air systems, electronic warfare, air defence systems, artillery ammunition, maritime intelligence, surveillance and reconnaissance, mine clearance, plant vehicles, logistic support bridges, and tracks and engines for armoured fighting vehicles. The UK will also provide Ukraine with £2.26Bn of military support through the Extraordinary Revenue Acceleration (ERA) loan, as part of the G7’s $50Bn ERA loan scheme. This funding will be used to provide Ukraine with artillery, long-range effectors, air defence and maintenance repair and overhaul equipment. The UK continues to deliver a major training operation for Ukrainian forces under Operation INTERFLEX, which has been extended to 2026. Working with 13 other partner nations, training of Ukrainian personnel is progressing well, with over 55,000 Ukrainian personnel trained in the UK since June 2022. Ukrainian soldiers on this training programme undertake courses based on the UK’s basic soldier training which includes: weapons training, battlefield first aid, fieldcraft, patrol tactics and training on the Law of Armed Conflict. We continue to learn from the Ukrainians about how tactics on the ground are evolving and adapt our training accordingly. As such, Operation INTERFLEX now also delivers leadership and basic training instructor courses. Courses are complementary to the Armed Forces of Ukraine’s (AFU) own training mechanisms, with leadership a key feature of the training over the last 12 months. The UK has a long-lasting history of training AFU personnel in different domains, such as specialist training, marines, pilots and doctors. Financial Performance Summary Aneen Blackmore, DG Finance Introduction The Finance Function is well-established within Defence, with clear policies and procedures and accountabilities supported by effective and proportionate internal controls and assurance. It is disappointing that MOD has received an audit qualification due to a “Material Limit of Scope” and a “Regularity Qualification” due to a breach in the non-budget parliamentary control total which has resulted from a prior period restatement. The material limit of scope audit opinion is in relation to Assets Under Construction balances acquired through the Atomic Weapons Establishment (AWE). AWE is a public limited company owned by the MOD which came back into the MOD’s boundary in July 2021. A complex set of legacy record keeping and structural differences between the AWE and the Department have contributed to the NAO’s limitation of scope finding. Significant work has been undertaken since 2021 to bring AWE into MOD’s boundary and strengthen financial processes. This further work identified by the NAO will be a priority to address during 2025-26. The regularity qualification relates to complex legal cases and accounting for resettlement schemes where insufficient provision existed to settle the obligation in 2023-24. In part this relates to a change in accounting treatment. In prior years the MOD accounted for resettlement schemes under an expensed approach where costs were recognised when they were incurred. In discussion with the NAO this year we have agreed to hold a provision where we can accurately estimate the relevant schemes. Nevertheless, the Function has played a pivotal role in enabling the Department to reform and strengthen. During 2024-25 we delivered a successful Spending Review 25 settlement and actively supported the Defence Strategic Review. Through the Defence Reform programme, we are accelerating functional reform to support the Department’s ambitions and as part of this, the Corporate Services Modernisation programme will improve both the effectiveness and efficiency of our operating model. The Spring Budget 2025 provided a £2.2 billion increase for the Department for 2025-26 and a settlement to increase NATO qualifying defence spending to 2.6% of GDP by April 2027. This increase was confirmed in the publication of the Strategic Defence Review in June 2025 and is welcomed. The review outlined several commitments, with a key one being the £15Bn to enhance the UK’s sovereign warhead programme, with investment in up to twelve new attack submarines. There was also a commitment to spend 10% of MOD’s procurement budget on novel technologies, enabling MOD to become a tech enabled Defence power. Defence Reform gives us an opportunity to streamline core finance processes in 2025-26 across the new structures established from 1 April 2025. Having consistent, efficient ways of working is critical to us delivering our purpose of managing public money responsibly and transparently. We are ensuring that the new accountabilities are clear and the mechanisms are in place from a control, assurance and governance perspective, with simplified and better informed approvals processes. Our people are critical to achieving our purpose and we continue to focus on career development and opportunities, as we continue to support Defence Reform. Financial Performance in 2024-25 Overview The MOD receives authority from Parliament to commit resources to run the Department, both capital and cash, via the Supply Estimates. These are published twice in each financial year. HM Treasury (HMT) is responsible for the design of the budgeting system against which the Department is controlled. Departmental Expenditure Limits (DELs) are set as part of the Spending Review process and departments must not exceed these limits. Resource Budgets control current expenditure such as pay, equipment support and infrastructure maintenance, as well as asset depreciation. Capital budgets exist to control new investment and allow spending on capital assets. Within the Resource DEL there is a separate Administration budget, also set in the Spending Review, to cover expenditure on running central government bodies (excluding their frontline activities). In addition, some expenditure is specifically ringfenced and requests to switch expenditure to other budget areas will not be approved. For MOD, this includes depreciation and impairment costs and the Cost of Operations. Annually Managed Expenditure (AME) budgets are demand led and volatile so cannot be absorbed within normal controls. The AME budget is set by HMT and any expected increases require Treasury approval. There is also a non-budget section of the Statement of Outturn against Parliamentary Supply (SOPS), to cover any prior period adjustments that may be required within the current year’s accounts. Performance Against Estimates: Except for the excess incurred against the Non Budget total, the Department’s financial outturn was delivered within all Parliamentary Control Totals and DELs. This was achieved through effective and regular scrutiny and challenge of our financial plans, forecasts and risks, with accountability for financial outcomes clearly defined. As a result we have effectively balanced the Capital Departmental Expenditure Limit (CDEL) to within less than 0.1% of the £22.704 billion budget. The Non-Ringfenced Resource DEL was also delivered to within less than 0.2% of the £35.788 billion budget. Analysis of Departmental Expenditure 2024-25 (Estimate vs Outturn £ billion): - Resource DEL (non-ringfenced): Estimate 35.788 | Outturn 35.719 | Variance 0.069 (0%) - of which administration: Estimate 2.017 | Outturn 2.015 | Variance 0.002 (0%) - Resource DEL (ringfenced): Estimate 8.782 | Outturn 8.295 | Variance 0.487 (6%) - Cost of operations (ringfenced): Estimate 1.824 | Outturn 1.809 | Variance 0.015 (1%) - Total Resource DEL: Estimate 46.394 | Outturn 45.823 | Variance 0.570 (1%) - Capital DEL (non-ringfenced): Estimate 21.107 | Outturn 21.103 | Variance 0.004 (0%) - Cost of operations (ringfenced): Estimate 1.597 | Outturn 1.594 | Variance 0.003 (0%) - Total Capital DEL: Estimate 22.704 | Outturn 22.697 | Variance 0.006 (0%) - Voted Resource AME: Estimate 8.584 | Outturn 5.024 | Variance 3.560 (41%) - Voted Capital AME: Estimate 0.005 | Outturn 0.004 | Variance 0.001 (22%) - Total Voted AME: Estimate 8.589 | Outturn 5.028 | Variance 3.561 (41%) - Non Budget: Estimate - | Outturn 2.565 | Variance (2.565) ((100%)) - Total Non Budget: Estimate - | Outturn 2.565 | Variance (2.565) ((100%)) Where We Spent Our Money in 2024–25 (Total Expenditure £60.225 billion): • Capital Expenditure: £21.103 Bn • Service Personnel: £11.999 Bn • Equipment Support: £6.159 Bn • Infrastructure: £5.209 Bn • Cost of Operations: £3.403 Bn • Defence Nuclear Resource: £2.834 Bn • Other Costs: £2.130 Bn • Administration: £2.015 Bn • Civilian Personnel: £1.793 Bn • Inventory: £1.424 Bn • DE&S: £1.264 Bn • War Pensions Benefits: £0.654 Bn • Arm’s Length Bodies: £0.239 Bn Spend on Main Areas of Conflict 2024-25 (Total Expenditure £3.403 billion): • Ukraine and Counter-Russia: £2.88 Bn • Other: £0.24 Bn • Broader Middle East: £0.16 Bn • Wider Gulf: £0.07 Bn • ISF (Integrated Security Fund): £0.05 Bn Performance Analysis 1. A more lethal, integrated force ready and able to deter, fight and win today and in the future, and a resilient nuclear deterrent: - Continuous At-Sea nuclear deterrent (CASD) maintained with Vanguard Class submarines. - Dreadnought ballistic missile submarine programme on track for First of Class, HMS Dreadnought, to enter service early 2030s. - 5 of 7 Astute Class attack submarines delivered (Boat 5 HMS Anson completed sea trials April 2024; Boat 6 launched October 2024; Boat 7 under construction). Fleet growing up to 12 under AUKUS. - Quick Reaction Alert (QRA): RAF Typhoons launched four times in 2024-25, including three times to track Russian aircraft approaching UK airspace. - Royal Navy shadowed Russian intelligence gathering vessel Yantar in November 2024 and January 2025. - Counter Terrorism: Op TEMPERER not activated in 2024-25; 16 capacity building projects globally. - Military Aid to the Civil Authorities (MACA): 67 operations delivered involving ~700 personnel. - Explosive Ordnance Disposal: Supported 2,135 callouts (1,811 conventional munitions, 324 IEDs). - Warfighting readiness: Investing up to £1Bn in homeland air and missile defence; HMS Diamond engaged multiple Houthi attack drones in Red Sea (first Royal Navy anti-aircraft engagements since 1991); Sky Sabre completed 2-year deployment in Poland. - Munitions: £6Bn planned investment in this Parliament, including £1.5Bn 'always on' pipeline; building at least six new energetics and munitions factories in the UK. - Directed Energy Weapons (DEW) Programme: DragonFire laser trials. - Cyber: Establishment of new CyberEM Command; NCF HQ development in Samlesbury. - Space: Launched TYCHE (first UK military Earth-imaging satellite) in August 2024. - Equipment Milestones: Type 26 frigate HMS Sheffield under construction (5th of 8); Type 31 frigate HMS Formidable steel cut (3rd of 5); Devonport 10 Dock £200M submarine refit facility reopened Sept 2024; E-7 Wedgetail AEW Mk1 maiden UK flight Sept 2024. 2. NATO First Approach & International Partnerships: - NATO 100 Day Test completed; historic commitment on 25 June 2025 to spend 5% GDP on defence & national security by 2035. - NATO deployments: Op HIGHMAST Carrier Strike Group; Forward Land Force in Estonia (Exercise HEDGEHOG May 2025 with ~2,000 UK troops); Exercise STEADFAST DART. - Bilateral / Multilateral: UK-EU Security & Defence Partnership agreed 19 May 2025; UK-Germany Trinity House Agreement signed 23 October 2024; UK-France Lancaster House reboot; Joint Expeditionary Force (JEF) Op NORDIC WARDEN. - AUKUS: Pillar 1 bilateral treaty signed 26 July 2025; US ITAR exemption came into effect Sept 2024. - Global Combat Air Programme (GCAP): Joint venture agreed Dec 2024, international office established in Reading, UK. - Middle East, Indo-Pacific & Africa operations detailed (Operation Prosperity Guardian, Operation Tangham, etc.). 3. Thriving UK Defence Industry & Acquisition Reform: - Defence Industrial Strategy published 8 September 2025. - Defence Industrial Joint Council (DIJC) replaced Defence Suppliers Forum. - National Armaments Director (NAD) leading end-to-end acquisition reform. - Defence Exports Office created; export deals include £1.6Bn LMM to Ukraine, Meteor to Republic of Korea, Type 26 to Norway (£10Bn). - UK Defence Innovation (UKDI) established 1 July 2025 with £400M ringfenced budget. 4. Value for Money & Adaptability: - Annington Homes deal (Dec 2024) returned military homes to public ownership with £1.5Bn+ new investment. - Digital Targeting Web investment of >£1Bn by 2027. - Sickness absence averaged 6.73 working days lost per person. 5. People & Society: - Regular forces female representation: 11.9%; civilian: 46.3%. - Regular forces ethnic minority representation: 12.2%; civilian: 6.9%. - VALOUR initiative launched (£50M commitment for veterans). - Armed Forces Commissioner Act 2025 introduced. 6. Climate & Environment / TCFD: - DCF Scopes 1, 2, and 3: 2.069 million tCO2e (down from 2.862 million tCO2e in 2023-24). - 168 Sites of Special Scientific Interest (SSSI) across estate. Accountability Report Corporate Governance Report: - Details membership and attendance of Defence Board, Executive Committee (ExCo), People Committee, and DARAC. - Summary of discussions of Key Committees and Boards. - Detail of Afghan Data Incident (Feb 2022 dataset emailed outside official government systems, discovered Aug 2023, super-injunction lifted July 2025, Rimmer review concluded in June 2025). - Summary of protected personal data incidents reported to ICO: 2 incidents (including Afghan data incident linked to 18,700 applications, and April 2024 cyber incident). - Other protected data incidents: 651 in 2024-25 (569 in 2023-24). - Statement of Accounting Officer’s Responsibilities signed by David Williams CB. - Board Performance report by Lead Non-Executive Member Brian McBride. Remuneration and Staff Report: - Remuneration policies and single total figure of remuneration for Ministers and Defence Board Members. - Highest paid military director mid-point £437,500 (10.2x median military pay £43,022). - Highest paid civilian director mid-point £472,500 (12.2x median civilian pay £38,888). - Total full-time equivalent staff (Departmental Group): 223,230 (Civilian: 65,051; Armed Forces: 150,177; Other: 7,993; Ministers: 5; SpAds: 4). - Total net staff costs: £17,753.0M (2023-24: £16,361.7M). - Exit packages: 456 total packages in Departmental Group costing £9.718M. - Consultancy expenditure: £81.903M; Temporary staff expenditure: £288.455M. - Off-payroll engagements: 2,679 earning >£245/day as at 31 March 2025. Statement of Outturn against Parliamentary Supply (SOPS): - Total Resource DEL Outturn: £45,823,378k (Estimate: £46,393,686k, Savings: £570,308k) - Total Capital DEL Outturn: £22,697,220k (Estimate: £22,703,647k, Savings: £6,427k) - Total Voted AME Outturn: £5,028,385k (Estimate: £8,589,087k, Savings: £3,560,702k) - Non-Budget Resource AME Outturn: £2,564,517k (Estimate: £0k, Excess: £2,564,517k) - Total Budget & Non-Budget: Outturn £76,113,500k vs Estimate £77,686,420k (Savings: £1,572,920k) - Net Cash Requirement: Outturn £64,068,238k vs Estimate £65,103,184k (Savings: £1,034,946k) - Administration Costs Outturn: £2,014,863k vs Estimate £2,017,301k (Savings: £2,438k) - Prior Period Adjustment: £2.565Bn for provisions for legal claims requiring an Excess Vote. Losses, Special Payments and Gifts: - Total number of losses: 18,982 valued at £1,896.516M (including £1,607.006M constructive losses such as retirement of Watchkeeper £734.9M, Albion & Bulwark £428.5M, Chinook £129.5M, HMS Northumberland £66.8M, Wave Class £58.1M). - Stores losses: £250.597M (including £217M fire damage). - Fruitless payments: £15.023M. - Claims abandoned: £1.220M. - Special payments: 5,225 payments totalling £110.707M. Certificate and Report of the Comptroller and Auditor General (Gareth Davies): - Qualified opinion on financial statements due to material limitation of scope on Assets Under Construction (AUC) at AWE (£6.13Bn). - Qualified opinion on regularity due to breach of Non-Budget expenditure control total (£2.56Bn prior period adjustment for legal & resettlement claims without prior Supply cover). Consolidated Statement of Comprehensive Net Expenditure (SoCNE): - Operating Income: £(1,973.3)M - Operating Expenditure: £52,734.6M - Net Operating Expenditure: £50,761.3M - Finance Income: £(355.3)M - Finance Expense: £1,246.8M - Net Expenditure for the Year: £51,652.8M (2023-24 restated: £47,750.9M) - Total Comprehensive Net Expenditure: £49,985.5M Consolidated Statement of Financial Position (SoFP) as at 31 March 2025: - Non-Current Assets: £197,892.7M (Property, plant & equipment: £157,371.9M; Intangible assets: £37,129.8M; Right-of-use assets: £2,073.7M) - Current Assets: £11,332.8M (Inventories: £5,125.5M; Receivables: £3,923.8M; Cash: £2,203.5M) - Current Liabilities: £(18,054.4)M (Payables: £(16,514.8)M; Provisions: £(1,307.9)M; Financial liabilities: £(231.7)M) - Non-Current Liabilities: £(20,753.6)M (Provisions: £(15,436.5)M; Payables: £(4,806.3)M; Pension liabilities: £(510.8)M) - Total Net Assets / Equity: £170,417.5M (General Fund: £134,730.3M; Revaluation Reserve: £34,924.7M; ALBs: £762.5M) Consolidated Statement of Cash Flows (SoCF): - Net Cash Outflow from Operating Activities: £(40,040.7)M - Net Cash Outflow from Investing Activities: £(16,266.1)M - Net Cash Flow from Financing Activities: £56,261.2M - Net Decrease in Cash and Cash Equivalents: £(45.6)M (Closing Cash: £2,203.5M) Notes to the Accounts: - Note 1: Statement of Accounting Policies. - Note 2: Segmental Analysis. - Note 3: Income (Operating: £1,973.3M; Finance: £355.3M). - Note 4: Expenditure (Staff: £17,753.0M; Goods & services: £21,822.0M; Depr/Impairment: £9,872.4M; Provisions: £910.9M; Finance exp: £1,246.8M). - Note 5: Intangible Assets (£37,129.8M net book value). - Note 6: Property, Plant and Equipment (£157,371.9M net book value). - Note 7: Financial Instruments and Investments. - Note 8: Inventories (£5,125.5M). - Note 9: Trade Receivables and Other Assets (£4,792.2M). - Note 10: Cash and Cash Equivalents (£2,203.5M). - Note 11: Trade Payables and Other Liabilities (£21,321.1M total). - Note 12: Provisions for Liabilities and Charges (£16,744.4M total, including Nuclear Decommissioning £12,798.6M and Legal £3,754.5M). - Note 13: Retirement Benefit Schemes. - Note 14: Capital Commitments (£36,749.7M total). - Note 15: Other Financial Commitments (MoUs: £2,657.6M; Non-cancellable: £674.9M). - Note 16: Leases (Right-of-use assets £2,073.7M; discounted lease liabilities £1,987.3M; Annington transaction £6Bn). - Note 17: Service Concession Arrangements / PFI. - Note 18: Contingent Liabilities (£3,492.5M quantifiable contingent liabilities under IAS 37). - Note 19: Related Party Transactions. - Note 20: Entities within Departmental Boundary. - Note 21: Events After the Reporting Date (Chagos Islands agreement). - Note 22: Prior Period Adjustments (Legal provisions restatement £2,564.5M). Annexes: - Annex A: Statement of Approved Maximum Armed Forces Numbers (Royal Navy: 31,350 voted, 25,630 maintained max; Army: 92,650 voted, 77,890 maintained max; Gurkhas: 5,060 voted, 4,500 maintained max; RAF: 35,800 voted, 30,800 maintained max; Reserve forces numbers detailed). - Annex B: Sponsorship Arrangements over £5,000 (Grand Total: £649,205.50 across various activities including BBMF, RAFAT, display teams). - Annex C: Core Tables (Total Departmental Spending 2020-21 to 2025-26; Resource DEL outturn £45,823,378k; Capital DEL outturn £22,697,220k; Administration Budget outturn £2,014,863k). - Annex D: Greenhouse Gas Emissions (DCF Scope 1, 2, 3 data, energy & fuel consumption). - Annex E: Water, Waste, and Flight Data (Water consumption: 15.81 million m3; Total waste: 40,000 tonnes). - Annex F: Arm’s Length Bodies – Additional Information (Detailed financial, staff and net expenditure breakdown for ALBs including AWE plc, CWGC, RFCA, museums, etc.). - Annex G: Reconciliation of Contingent Liabilities Included in Supply Estimate to the Accounts.