NATO Legislators Visit London to Discuss Transatlantic Economic Tensions

The United Kingdom (UK) is investing for a future as a leader among NATO’s European Allies. In this new era for defence and security, when Russia is waging war on the European continent and probing European defences elsewhere, the UK believes that the transatlantic community must meet the danger head on. Therefore, to deter Russia effectively, European NATO countries need to show they can convert their far greater resources into fighting forces.  

The UK has started a shift in both mindset and production to prevent a future war in Europe. The shift in mindset is recognising that Europe is in a pre-war situation and should prepare for war to prevent one. The production shift means both producing more fighting forces now and showing how these can be scaled up in the case of war. 

After nearly a year of writing, the UK released its Strategic Defence Review (SDR) at the beginning of June. The SDR signifies a landmark shift for the UK in deterrence and defence: moving to warfighting readiness to deter threats and strengthen security in the Euro-Atlantic area. This will be achieved by the UK leading within NATO and taking on more responsibility for European security.  

In NATO, the UK is leading the land component of the new Allied Reaction Force until mid-2025. The UK contributes to every NATO operation and mission. Current commitments include, among others, an army battalion in Estonia and a squadron in Poland as part of NATO’s forward land forces, Typhoon aircraft to support air policing missions in the Baltics and in eastern NATO countries, as well as contributing to maritime missions, including Operation Sea Guardian in the Mediterranean, and surveillance aircraft to Baltic Sentry. 

The UK also continues to strengthen transatlantic economic relations and serves as a financial and innovation hub for investors in the transatlantic area. The recently signed UK-U.S. Economic Prosperity Deal ensures that the bilateral relationship between London and Washington is rooted in an enduring economic partnership that is fair, reciprocal, future-facing, and built on a shared vision of the challenges that face the economies. 

Against this backdrop, on 12-13 June 2025, the NATO Parliamentary Assembly organised a visit to London where the delegation from the Assembly’s Sub-Committee on Transatlantic Economic Relations (ESCTER) met with leading British security policymakers, economic experts as well as innovators from the NATO Defence Innovation Accelerator for the North Atlantic (DIANA). Baroness Denise Kingsmill (UK), Chairperson of the ESCTER, led the delegation which consisted of 18 Members of Parliament from 9 Allied countries. 

The Strategic Defence Review: The Future of UK Defence and Defence Industry 

The SDR, meant as a root-and-branch assessment of the country’s defence policy, is a candid appraisal of Britain’s vulnerabilities, and sets out a broad and ambitious agenda for the decade ahead. As Lord George Robertson, a former NATO Secretary General who led the review, told the delegation the execution of the SDR will position the UK as a leading tech-enabled defence power, with an integrated force that deters, fights and wins through constant innovation at wartime pace. Setting the strategic scene, the review states that the world is beset by growing multipolarity and intensifying strategic competition, compounded by rapid technological change. Russia is highlighted as an immediate and pressing threat, the People’s Republic of China (PRC) as a sophisticated and persistent challenge, and North Korea and Iran as regional disruptors. The review notes the growing alignment between these revisionist states – a key threat to British and NATO Allied interests.  

To counter this challenge, the SDR stresses that Britain’s military needs to pivot to warfighting readiness and adapt to new ways of fighting. To do this, the review recommends that the UK places the nuclear deterrent at the heart of national security, commit to a ‘NATO first’ policy by stepping up on European security and leading in NATO, while retaining global partnerships such as AUKUS and the Global Combat Air Programme (GCAP). AUKUS is a three-way strategic defence alliance between Australia, the UK and U.S., initially to build a class of nuclear-propelled submarines, but also to work together in the Indo-Pacific region and develop wider technologies. GCAP is an international partnership between the UK, Japan and Italy which will design, manufacture, and deliver a next-generation crewed combat aircraft. The review also recommends substantial investment in munitions production, including six new factories with an always-on production pipeline, as well as to increase Britain’s missile production capabilities.  

Lord Robertson confirmed that the UK will increase its defence spending to 2.5% of GDP in 2027 and has the ambition to spend 3% of GDP on defence in the 2030s if economic and fiscal conditions allow.  

Lord Vernon Coaker, Minister of State at the British Ministry of Defence, stressed that defence has significant untapped potential to be a new engine for growth at the heart of the UK’s economic strategy. Radical root-and-branch reform of defence procurement – combined with substantial investment in innovation, novel technology, advanced manufacturing and skills – would grow the productive capacity of the UK economy. The SDR serves as an important signal to defence companies. With a clear strategy, defence companies know what they need to produce now and in the future. The SDR helps to incentivise the right kind of production and innovation at lower costs.  

Lord Coaker also announced the establishing of the UK Defence Innovation Fund, a special fund dedicated to finance and grow UK based companies, as well as the upcoming publication of the UK’s Defence Industrial Strategy.  

Transatlantic Economic Relations 

2025 is a year of peril and promise for the transatlantic economy. Tensions abound, including transatlantic trade disputes, disruptive politics, supply chain uncertainties, raw materials scrambles, challenges from China and Russia’s ongoing aggression against Ukraine and other neighbours. Real economic growth is expected on both sides of the Atlantic, yet growth rates will be uneven. The U.S. is expected to expand by 2.7%, while Europe faces a more modest 1% growth rate. Trade tensions along with structural challenges on both sides, from inflationary pressures in the U.S. to regulatory and energy cost burdens in Europe, add to the uncertainty. 

Creon Butler, Director of the Global Economy and Finance Programme at Chatham House, noted that in the past five months Donald Trump has delivered one of the largest shocks to the rules-based international trading system since its establishment after World War II. This disruption stems from the sheer size of the tariff increases the president has imposed. The average tariff rate for the world’s largest importer rose from 2.5% in 2024 to 28% in early May 2025 and was still at 17.8% after bilateral deals with Britain and China reduced or temporarily paused some increases. According to Creon Butler, some of the consequences of this shock cannot be reversed. Yet, it is likely that a reshaped rules-based international trading system will eventually emerge with or without the U.S. Though the US remains the world’s largest economy, accounting for 26% of global GDP by market value, it has become less dominant in global trade and investment. Approximately 80% of world trade does not directly touch the US and most of it continues to be conducted under World Trade Organization (WTO) rules. This raises the possibility that the rest of the world could maintain a stable and predictable world trade and investment system around a disruptive US. WTO members need to develop a vision of a reshaped international trading system. This requires leadership, which so far has not been evident, Butler noted. The EU is arguably the natural candidate but has so far held back. 

Chris Southworth, Secretary General of the International Chamber of Commerce UK, highlighted that the European governments have rightly prioritised growth and productivity. To achieve this, Europe must scale the benefits of trade digitalisation and make it cheaper, faster and simpler for companies to increase the value and volume of trade. Buyers and sellers in Europe are uniquely positioned to now demand change to the trade system to unlock the growth and investment the economy needs. And, in the process drag the trading system out of the 19th century and into the modern, digital era so it is fit for purpose. The rules and standards which are now in place should enable companies to remove paper and connect platforms and systems so trade data can flow between the public and private sectors. According to Chris Southworth, evidence shows that trade digitalisation can result in a 100% increase in trade flow, 15% increase in profitability and an 18% reduction in shipping costs.  

European Rearmament Bank 

During the visit the delegation was also briefed on the concept of the European Rearmament Bank (ERB). Edward Lucas underlined that a consensus is emerging about the need for a new multilateral financing instrument, specifically for defence equipment funding. The new instrument should deliver more money to governments for defence equipment purchases without unduly burdening their budgets as well as improve spending, catalysing an efficient pan-European defence equipment market. The potential ERB could be based on the well-proven model of existing multilateral government banks. The ERB could function as a single institution to lend directly to governments and to defence companies, thereby streamlining financing flows. Satisfying key conditions would be a requirement for the ERB financing. The most important conditions should include international tendering without national preferences at prime and sub-prime level, pooling of orders when possible, avoiding duplication of systems and a full incorporation of NATO standards. 

Sanctions on Russia 

The delegation visited the Royal United Services Institute (RUSI) to discuss sanctions which are now the preferred policy instrument to tackle a range of international security threats. However, the sanctions response to Russia’s full-scale invasion of Ukraine has highlighted the challenges of implementation and enforcement, which undermines effectiveness and has increased the range of unintended consequences. The G7 has implemented a range of sanctions aimed at restricting the Kremlin’s revenue from oil and other energy exports, critical to financing its military operations. Russia has sought to evade these measures, notably through the development of a shadow fleet designed to circumvent the G7-imposed oil price cap. Russia’s shadow tankers use spoofing to hide entry into Russian ports or ship-to-ship transfers at sea, where oil is moved sometimes multiple times between vessels and may be blended with oil from other countries to obscure its origin. To conceal their activities further, the shadow fleet uses flags of convenience from countries that are less likely to enforce Western sanctions and have complex ownership and management structures to hide links to Russia. Russia's shadow fleet operations also pose serious environmental and maritime safety concerns. 

Tom Keatinge, Director of the Centre for Finance and Security at RUSI, argued that it is time to revisit oil sanctions on Russia. Western countries should focus on stepping down global purchases of oil and develop ways, including greater use of sanctions against banks involved in transferring oil payments to Russia, of arresting and immobilising Russia’s access to its oil revenue – money that should be benefiting the reconstruction of Ukraine. 

The delegation also engaged with Eduard Fesko, Deputy Ambassador of Ukraine to UK, to discuss the current situation in the Russia-Ukraine war and the ways Allies can support Ukraine in the future. 

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The Assembly, though institutionally separate from NATO, serves as an essential link between NATO and the parliaments of the NATO nations. It provides greater transparency of NATO policies and fosters better understanding of the Alliance’s objectives and missions among legislators and citizens of the Alliance. Throughout 2025, the Assembly celebrates 70 years of parliamentary diplomacy. 

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Photos of the visit here