Michael Moore's Outlook on granting private capital ‘permission to invest’ in defence

There will come a point when President Trump is not mentioned in every opinion piece you read in the media. But that moment has not yet arrived, I have to warn you. Not in this contribution at least.

The US President commits news every time he speaks, and most of his contributions would be box office regardless of the topic, thanks to the way he has subverted the normal rules of communication and politics. 

Alas, the temptation to treat his approach as a soap opera has to be resisted, as the stakes in many areas are too high, to state the obvious. Defence and security dominated the first few weeks of his presidency. We have never seen anything like it. 

In the past month the dial moved across to the economy. Helter skelter announcements on tariffs, twisting this way and that, grabbed plenty of attention. Who knew you could dial down the world economy so quickly? 

You can certainly tell it has all gone slightly mad when respected UK comms agencies are providing daily guidance on the changes in US tariffs. But again, grimly compelling as it has been, we have to resist the temptation to grab the popcorn, put our feet up and treat it all as entertainment.

Which takes me back to defence and security. The after-effects of the January jolt to the world order will be felt for some time. The recent terrible images from Ukraine, juxtaposed with those of President Zelensky and President Trump meeting at the funeral of Pope Francis, remind us of what is at stake.

Away from the battle lines, Europe is weighing up the new realities. Capital is a scarce resource, not least in the public sector. What is needed is actively managed capital to invest in complex technology businesses led by smart, innovative entrepreneurs. Step forward the private capital industry.

Happily, there is a clear appetite to be involved in this new mission. But there are challenges, too, and there needs to be a clear-sighted recognition by governments that serious constraints need to be addressed if the investment is to flow.

So let’s focus on the big picture, and specifically the need to have ‘permission to invest’. 

Some may ask, “Is that even a thing?”. Well, not in the sense that there are people handing out certificates to investors turning up at defence ministries across the continent. 

But the concept is real enough and there are three critical dimensions to tackle.

First of all, political leaders have to provide permission. It is a sine qua non that prime ministers and chancellors make the case for increased defence spending, then encourage the private sector (never mind private capital) to be part of it, and explicitly legitimise investors to generate appropriate returns from the capital deployed. 

This permission is far from straightforward to secure in normal times. The fact that leaders from the left and right of politics are appearing to grant it with urgency in most parts of Europe reminds us that these are not normal times.

Next, investors themselves need to give permission. This is not just the small matter of navigating formal ‘Environment, Social and Governance’ rules, which may or may not be explicit on the subject of defence (or weapons) investment. ‘Tricky’ does not fully capture how complicated this could be. 

There is also an informal ‘cultural permission’ required. Even if mandates, or guidance, are not drawn too restrictively, judging how comfortable the beneficiaries of the investment will be with a defence-focused investment strategy will require care. 

And even if judgments informed by values are set aside, there will be understandable caution while the market works out the dynamics of a bigger version of this complex investment sector.

Which brings us to the third dimension, back close to where we started, but this time looking at the regulators who need to grant a set of permissions which are critical to securing private capital investment. This may actually be the trickiest part because this time it is indeed about regulators handing out the equivalent of permission certificates. 

What competition rules apply? What parts of financial conduct regulation come into play? What restrictions are there on who can buy a defence business invested in by private capital? Fettered exits are rarely the hallmarks of a winning investment strategy, after all. This will require some careful working out.

So, this ‘permission to invest’ thing does indeed exist. And collecting the full permission set is going to be challenging. But not insurmountable. Things rarely are. The last few months have shown the imperative and seen the first permissions granted. Hopefully the rest will follow soon. 

Michael Moore
Chief Executive, BVCA

This article was originally published on 12 May 2025 on the Private Equity News website here.