Reeves directs ministers to prioritise British firms in critical sectors

Chancellor Rachel Reeves has issued a directive to cabinet ministers requiring them to award government contracts in shipbuilding, steel, energy, and artificial intelligence directly to British companies. The instruction, delivered via a letter co-signed by Cabinet Office minister Chris Ward, marks a significant departure from a procurement model focused solely on cost, urging departments to prioritise national interest and contractor nationality.

The move follows widespread criticism regarding recent contract awards to foreign entities, including a £200m navy support vessel deal with Dutch builder Damen and a £9m research ship refit for Danish yard Orskov. Reeves expressed disappointment that ministers have been sending excessive government business abroad, instructing officials to take further steps to ensure departments act in the wider national interest rather than focusing on narrow operational priorities.

Officials within the Treasury and Cabinet Office will now monitor billions of pounds in contracts across the four key industries. If departmental decisions fail to align with this agenda, officials have the authority to override them. This intervention aims to address what allies describe as the "inertia" of civil servants who continue to prioritise cost over the nationality of contractors, a tendency that some argue risks undermining national security.

The directive comes amid concerns over the UK’s reliance on imported energy and potential foreign involvement in critical infrastructure, including fears that Chinese company Mingyang could supply turbines for North Sea windfarms. The government plans to utilise the 2023 Procurement Act to potentially ban companies deemed national security risks, allowing for direct awards in these critical sectors without competitive bidding.

Reeves promised to issue further guidelines to government accounting officers later this summer, requiring them to consider contractor nationality alongside costs. She warned that each department would be held to account for its progress in complying with the new guidance. The instruction also arrives against a backdrop of internal Labour Party tensions, with allies of Reeves and Energy Secretary Ed Miliband campaigning for their respective leaders should Prime Minister Keir Starmer be replaced.