Saudi Arabia has imposed a freeze on new spending for major defence projects with the United Kingdom, Whitehall sources confirmed on Tuesday. The decision, driven by Riyadh's efforts to rein in fiscal deficits amid lower oil revenues, suspends several multibillion-pound contracts under negotiation, including Typhoon jet upgrades and naval support systems. The move threatens to disrupt Britain's export-led defence strategy, which has relied heavily on Gulf partners since the 2015 Saudi-led intervention in Yemen.
The freeze was communicated informally to British officials during technical talks in London last week. Saudi Arabia's Ministry of Finance has instructed the Ministry of Defence to halt all new procurement approvals until the 2025 budget review, citing the need to prioritise domestic spending under Vision 2030 reforms. The UK Ministry of Defence declined to comment on specific projects but confirmed it was “aware of ongoing discussions with international partners regarding programme timetables.”
Analysts estimate the suspended contracts are worth at least £6 billion over the next decade. BAE Systems, which manufactures the Typhoon and derives a significant portion of its revenue from Saudi orders, saw its shares fall 2.3 per cent in early trading. The company said it remained “committed to its long-term partnership with the Kingdom” but did not address the funding pause.
The development is a setback for the UK's commitment to “Global Britain” defence exports, a pillar of the Integrated Review published in 2021. Critics argue that over-reliance on Saudi orders exposes the UK to geopolitical volatility. “This is a reminder that petrodollar diplomacy comes with a sting,” said Sir James Drummond, former British ambassador to Riyadh. “The Saudis are serious about fiscal discipline; London must diversify its client base.”
The freeze does not affect existing contracts, including the £5.9 billion deal for 48 Typhoons signed in 2018. However, it delays next-generation fighter discussions and raises questions about the UK's ability to fund its own Tempest programme without Saudi co-investment.
The timing is awkward for Prime Minister Rishi Sunak, who is expected to attend the Riyadh defence summit in November. Downing Street played down any suggestion of a rift, with a spokesperson saying the UK and Saudi Arabia “share a deep and enduring relationship” and that “commercial negotiations are a matter for companies.”
Saudi Arabia's austerity push follows a projected budget deficit of 2.3 per cent of GDP in 2024, after oil revenues fell by 18 per cent year-on-year. The Kingdom has raised VAT, cut subsidies, and reduced capital expenditure. The defence freeze is the most significant foreign policy consequence to date, underscoring the tension between long-term strategic alliances and short-term fiscal prudence.
For the UK defence industry, the pause leaves a hole in order books. Lockheed Martin's F-35 and Dassault's Rafale are seen as alternatives if Saudi Arabia resumes procurement later. British officials insist the relationship is “not transactional” but the freeze will test the depth of the partnership. The coming months will reveal whether Riyadh's belt-tightening is a temporary measure or a structural shift in the Gulf's defence appetite.
