Executive Summary

The UK’s defence industry faces a critical talent shortage, posing a significant threat to its operational capabilities and national security. A perfect storm is brewing due to skill gaps in crucial areas like Artificial Intelligence, cybersecurity, robotics, and software development, compounded by an aging workforce and intense competition for STEM professionals from high-paying industries such as technology. Difficulties in retaining staff, evolving employee expectations, and a persistent lack of diversity further exacerbate these challenges, stifling innovation and narrowing the available talent pool.

This report underscores the urgent need for the defence sector to adopt innovative and strategic approaches to talent management. Key recommendations include comprehensive succession planning to safeguard institutional knowledge, the proactive development of external talent pipelines through collaborations with educational institutions, and significant investment in upskilling initiatives and internal mobility to bridge existing skill deficiencies. Furthermore, enhancing the employee value proposition through competitive compensation, flexible work arrangements, inclusive workplace cultures, and robust wellbeing programs is vital for attracting and retaining top-tier talent.

Examples from leading industry players, such as BAE Systems, illustrate that joint efforts between government and the private sector can yield substantial progress, particularly in addressing cybersecurity skill shortages and improving workforce diversity. However, continuous vigilance and investment are imperative to anticipate future skill demands and adapt to rapid technological advancements.

Ultimately, by embracing a forward-thinking, data-informed talent strategy, the UK defence sector can secure its technological advantage, bolster national resilience, and transform defence into a dynamic, innovative economic driver. Failing to act decisively risks falling behind global competitors in an increasingly unstable global landscape.

The Intense Competition for STEM Talent

The defence industry has historically relied heavily on individuals with backgrounds in Science, Technology, Engineering, and Mathematics (STEM). However, a concerning trend has emerged, with a recent report from Guidant Global indicating that a significant 83% of defence employers in the UK express concerns about a current scarcity of STEM talent. Fears are growing that the UK defence sector could fall behind global rivals as a direct consequence, especially as STEM skills are increasingly in demand across various other sectors, most notably the rapidly expanding technology industry. In 2024, the technology sector was identified as the highest-paying industry (Adria, 2024), making it unsurprising that STEM professionals might gravitate towards a career in technology rather than defence. The average starting salary in the UK tech sector is approximately £45,000, with experienced professionals potentially earning up to £120,000 (LSE, 2025). These figures significantly outpace many entry-level and mid-career positions within the defence sector. With major tech companies possessing the resources to offer more attractive salaries and benefit packages, the defence industry is struggling not only to retain its existing talent but also to attract new talent for the future.

What are the challenges surrounding STEM talent in Defence?

Skill Gaps in the Current Workforce

The skills required by the defence sector have undergone a massive transformation in recent years. In 2025, proficiency in areas such as Artificial Intelligence (AI), Software Development, Robotics, and Cybersecurity are fundamental for the defence sector’s operations. This represents a substantial shift from the skillsets that were essential when many defence professionals began their careers. Consequently, notable skill shortages and gaps have become evident within the existing workforce. For example, while traditional engineering disciplines remain important, the integration of AI into military systems necessitates a new generation of engineers with specialized expertise in machine learning (ML) and data analytics.

Currently, it’s estimated that only about 15% of engineers within the defence sector possess specific AI/ML expertise, creating a critical bottleneck in the development and deployment of advanced military capabilities (Engineering Council, 2024). Companies like BAE Systems and Raytheon Technologies have reported difficulties in finding engineers with the necessary experience to support next-generation platforms and digital warfare capabilities. This talent gap is further exacerbated by a global scramble for similar skills across diverse sectors such as fintech, space exploration, and large technology corporations.

This disparity between the traditional skills prevalent in much of the current workforce and the emerging demands presents a significant hurdle for the defence sector in maintaining its technological edge. This situation is a major concern, as a lack of expertise in modern technology and cybersecurity within the defence sector could leave the UK vulnerable to cyber-attacks. Without a skilled workforce capable of implementing and maintaining robust security measures, critical infrastructure and sensitive information face heightened risks. It will also make it difficult to maintain and upgrade existing systems. A talent deficit could result in the UK falling behind other nations in its defence capabilities.

The industry also faces two distinct yet pressing challenges: an impending wave of retirements threatens to erode decades of institutional knowledge, while simultaneously, there aren’t enough individuals entering the talent pipeline to absorb this accumulated expertise. Both Rolls-Royce Defence and Leonardo have identified succession pressures stemming from an aging workforce as a strategic concern, particularly within engineering, prompting accelerated succession planning and increased graduate intake schemes. The transition to a more digitally and AI-enabled defence force requires a meticulous transfer of expertise, alongside the crucial task of upskilling new recruits.

Securing qualified candidates is further complicated by non-compete agreements and lengthy security clearance processes, which contribute to bottlenecks in security clearance and onboarding. With delays extending to months or even years for hiring, clearing, and onboarding, many positions remain vacant, creating ripple effects on program timelines and delivery. The burden of security clearance disproportionately impacts emerging talent and lateral hires from outside the traditional defence domain.

Retention & Value Proposition

In addition to seeking new talent, it is crucial for the defence sector to effectively retain its existing workforce. Competitive salaries and comprehensive benefit packages offered by other industries can often entice defence employees to seek opportunities elsewhere. For instance, engineers trained in maintaining military aircraft are increasingly transitioning to robotics engineering outside of defence, where they are offered higher salaries (War on The Rocks, 2025).

Workforce expectations are evolving, with a younger engineering demographic increasingly prioritizing flexibility, a sense of purpose, and inclusive cultures. This further emphasizes the need for proactive Employee Value Propositions. Defence firms are adapting by actively soliciting feedback – enhancing career development pathways, introducing hybrid working models, conducting salary and total reward benchmarking exercises, and investing in sustainability initiatives to appeal to the next generation of talent. However, they continue to face strong competition from commercial tech firms that typically offer faster innovation cycles and less bureaucracy.

This retention issue is a significant factor contributing to the skill gap problem and will only intensify if not adequately addressed. As these challenges become more prevalent, there is an increased risk of employee burnout within the sector, as current employees face heightened pressure while attempting to compensate for personnel shortages. This could severely decrease workforce morale, consequently worsening retention issues as employees seek less stressful alternatives.

A Lack of Diversity

STEM fields are often contend with diversity challenges, and the defence sector is no exception, facing ongoing criticism regarding the significant underrepresentation of women and ethnic minorities – particularly in leadership and technical roles. For example, only 16.5% of individuals working in engineering occupations are women (Engineering UK). This highlights that fields vital to the defence sector exhibit a serious lack of diversity, further restricting the talent pool available to the defence sector. This absence of diversity not only limits the available talent but also impedes innovation and problem-solving by excluding a broad spectrum of perspectives and experiences.

Companies such as Lockheed Martin and Thales Group have integrated diversity and inclusion into the core of their workforce strategies, launching targeted outreach and internal development programs. Nevertheless, attracting and retaining underrepresented talent continues to be a major obstacle.

Cultivating a diverse and inclusive workforce can, among many benefits, foster innovation, drive improved decision-making, and support greater employee satisfaction. This can lead to a happier, more dynamic, and engaging work environment that supports organizational development, growth, and change. Ultimately, enhancing diversity will strengthen the sector’s capacity to adapt and innovate.

How Can These Challenges be Resolved?

The challenges outlined above indicate an urgent need for strategic and proactive solutions. Central to this is succession planning, which involves identifying employees who have the potential to fill future leadership roles and ensuring they receive appropriate training and development to prepare for when such a role becomes vacant. Providing targeted training, mentorship opportunities, and exposure to increasingly challenging responsibilities will equip these employees to seamlessly transition into leadership roles, making the process of filling a vacant position much less stressful and time-consuming.

Effective succession planning not only prepares an organization for when someone in a leadership role departs but also plays a crucial role in retaining top talent by offering these individuals a clear vision of their career progression within the organization. Knowing that opportunities for advancement exist and that their contributions are valued for the long term can significantly boost employee morale and confidence in the organization’s future, fostering a more stable and engaged workforce.

Building Talent Pipelines

While internal development is crucial, the defence sector must also proactively construct external talent pipelines to compensate for the significant STEM talent deficit. Moreover, if organizations within the defence sector only begin searching for talent once roles become available, they risk wasting time and enduring longer waits for positions to be filled. Building a talent pipeline resolves this issue, as it entails identifying and cultivating relationships with prospective talent before they are actually needed. This will ensure that the defence sector is prepared for its future talent requirements.

The initial step in establishing a talent pipeline is to anticipate what future skill gaps might look like and determine the skills future candidates will need. This involves considering upcoming technological advancements and the skills required to effectively utilize and manage this technology. Once the key skills have been identified, profiles outlining the ideal candidates should be created. These profiles should be tailored to specific roles and emphasize the essential skills, experience, and qualifications candidates would need. Subsequently, the process of sourcing and engaging with potential talent can commence. This involves building relationships with individuals who possess the required skills, even if they are not actively seeking new employment.

It is also important to engage with individuals at the outset of their careers. By engaging with students early, the defence sector can actively nurture the next generation of engineers, cyber specialists, and AI experts. This can be achieved through STEM initiatives in schools, apprenticeships, and graduate programs. Partnering with universities and colleges to offer internships, placements, and graduate programs would be an excellent way to cultivate the talent needed by the defence sector early on, preventing future skill gap issues.

Retention & Employee Value Proposition

For the Defence sector to retain its top talent, it must be able to offer competitive salary and benefits packages to prevent employees from being enticed to move elsewhere. Regular benchmarking against comparable roles in other sectors, particularly the technology industry, is essential to ensure that compensation remains appealing. The defence sector has made efforts to retain its staff, with the Ministry of Defence (MOD) implementing financial incentives, such as a £30,000 retention payment for a cohort of Tri-service aircraft engineers (announced in November 2024) (Gov.UK). Other financial incentives, beyond base pay and bonuses, often include life assurance policies and competitive employer pension rates.

While financial incentives can be an effective method of retaining staff, it is also important to consider alternative motivators. For instance, the defence sector can promote its unique value proposition by highlighting the fulfilling nature of mission-driven work and the direct contribution to national security. Additionally, if the defence sector cannot always match salaries offered by private organizations such as tech companies, there should be a broader focus on the overall employee value proposition. This means considering factors such as:

• Transparent pay policies: Including clear, understandable pay progression frameworks.
• Recognition: How exceptional work is rewarded, often linked to variable pay.
• Meaningful performance measures: Clear and tangible indicators to motivate employees, where their input directly influences outcomes.
• Non-financial employee benefits: Health and wellbeing initiatives, employee perks like retail discounts and memberships, and leave entitlements.
• Working environment: Offering flexible working arrangements.
• Company culture: Cultivating a positive company culture where everyone feels valued.
• Learning & Development: Linking to career progression, with clear pathways for employee advancement.

The points listed above are all factors that could attract employees to the sector and make current employees less likely to leave. For example, non-financial employee benefits could encompass wellbeing perks such as free gym memberships, additional annual leave, childcare support, and flexible working arrangements. A particularly popular employee benefit is the provision of health cash plans. These allow employees to reclaim expenses for routine healthcare, such as dentist appointments, eye tests, physiotherapy sessions, and health screenings. This offers employees peace of mind regarding unexpected medical expenses and provides opportunities to bypass lengthy waiting lists by seeking private care. It also encourages employees to attend regular medical appointments, which can lead to earlier detection of health issues, reduced long-term absences due to illness, and an overall improvement in workforce health and wellbeing. Many modern health cash plans also include mental health provisions, such as access to 24/7 counseling helplines and therapy sessions. This can assist with stress management, contributing to a happier and more engaged workforce.

Furthermore, implementing attractive family policies (e.g., enhanced maternity/paternity pay and flexible or remote working arrangements) not only aids in retention but also contributes to addressing issues of diversity and inclusion. In particular, it will help to attract and retain more women, who often bear greater caring responsibilities and face more significant career interruptions when starting a family. Enhanced paternity leave also encourages a more equitable distribution of childcare responsibilities, further supporting women’s career progression and fostering a more inclusive workplace culture for everyone. By demonstrating a commitment to work-life balance through these supportive family policies, the defence sector can broaden its appeal to a wider and more diverse talent pool, attracting individuals who need to prioritize family alongside their professional aspirations.

Upskilling and Boosting Internal Mobility

While establishing long-term talent pipelines is crucial for future success, implementing strategies to enhance the skills of the existing workforce and promote internal mobility can offer more immediate solutions to address current skill gaps. Investing in comprehensive training and development programs can equip current defence workers with the new skills needed in emerging fields such as AI, cybersecurity, and robotics. Offering engaging and clearly defined career development opportunities within the sector also serves as a potent tool for employee retention. This approach is particularly effective as internal candidates often possess a deep understanding of existing processes and organizational culture, significantly reducing the time and resources required for onboarding into new roles. By fostering a culture of continuous learning and providing clear pathways for internal advancement, the defence sector can simultaneously address skill shortages and enhance employee engagement and loyalty.

How Can These Challenges be Resolved?

Industry Efforts to Tackle Talent Challenges: Case in point: BAE Systems

BAE Systems identified a critical risk to its succession planning as early as 2020, highlighting significant skills shortages and diversity gaps within its cybersecurity function. The 2019 (ISC)² Cybersecurity Workforce Study reported a global deficit of four million cybersecurity professionals and noted that just 24% of the workforce were women. The same study also revealed ‘major’ pay disparities across the sector.

While government initiatives, such as a £20 million cybersecurity skills program for 14-to-18-year-olds, were launched to address the issue, BAE Systems made a much more substantial commitment: investing £90 million in STEM programs across the UK, including targeted cybersecurity initiatives.

Recognizing the urgency of the skills gap, BAE has now trained approximately 3,000 apprentices and launched a national schools roadshow, reaching over 450 institutions throughout the UK. This proactive outreach enabled the company to engage with potential future talent early in their educational journeys, cultivating a pipeline of skilled professionals from diverse backgrounds.

This dual strategy, combining government support with private sector investment, has contributed to noticeable progress. According to the UK Government’s Cyber Security Skills in the UK Labour Market 2024 report, the number of cybersecurity graduates has increased by 34% since 2019. However, the study also found that women still only account for 17% of the workforce, indicating that gender representation remains a significant challenge in the field.

Further analysis by BAE Systems revealed that 90% of cybersecurity professionals believe the industry could do more to support Diversity, Equity, and Inclusion (DE&I) initiatives. Strikingly, two-thirds of respondents felt diversity was worse in tech than in any other UK sector. In response, BAE took deliberate steps to improve gender balance at the highest levels, appointing three women to its executive committee and publicly committing to achieving a 40% gender mix in senior leadership.

While BAE Systems appears to be making tangible progress on its diversity agenda, questions remain about the sustainability of its succession planning and overall skills resilience. The company must continue to horizon scan – investing in R&D, listening to employees, and building a diverse workforce with broad experience. As for what’s next? Industry insiders suggest that skills gaps in cryptography and communications security have doubled in recent years, from 12% to 24%, pointing to another looming challenge on the talent front.

Conclusion

The escalating competition for STEM talent is a challenge the UK defence sector simply cannot afford to overlook. The defence sector is confronting a growing talent crisis as it grapples with a perfect storm of skills shortages, succession risks, and evolving workforce expectations. As global threats change and technological innovation accelerates, defence companies are under increasing pressure to secure the right engineering and technical talent to maintain capability and readiness.

These significant skill gaps, coupled with a competitive global market for expertise and a lack of diversity, are all jeopardizing the nation’s defence capabilities. To maintain an operational advantage, defence organizations must adopt a more proactive and data-driven approach to talent intelligence. Without bold changes, this traditionally rigid sector risks falling behind both technologically and demographically, as other sectors embrace adaptability as the norm.

By embracing proactive strategies focused on robust succession planning, strategic talent pipeline development to forecast future skill needs, a compelling employee value proposition, and a steadfast commitment to upskilling and internal mobility, the sector can move towards a more secure and innovative future.