The UK head of French defence company Thales said talks were underway with the cash-strapped British Government to secure investment from pension and infrastructure funds to help boost military spending.
Britain is aiming to meet the NATO commitment of spending 3.5 per cent of GDP on defence by 2035, but ministers have yet to set a target date for meeting three per cent.
Ahead of his first budget on October 28, finance minister John Healey has limited options for finding additional cash for defence.
Phil Siveter, UK CEO of Thales, told reporters at an event on Monday that Britain should focus on creating the right conditions to attract private capital to help fund defence.
"We've got some good discussions with government of where we think there's a role to play (for private finance), and we're gearing up for that," Siveter said.
He said with credible long-term demand signals, pension funds, infrastructure investors and private equity would be prepared to invest billions needed on, for example, expanding manufacturing capacity.
One area he sees as ripe for private capital is on providing underwater surveillance capability to protect critical national infrastructure such as internet cables.
Siveter suggested government could look to the public-private funding model behind London's Thames Tideway mega-sewer infrastructure to help draw in investors.
He added that Healey, who quit as defence minister earlier this year after he failed to secure funding for defence spending to reach three per cent by 2030, would be committed to "innovation" around securing new funding.
Thales UK employs 7,500 people, where it manufactures lightweight missiles, makes sensors for submarines and develops radars for warships.
(Reporting by Sarah Young Editing by Alexandra Hudson)
