The new funds "will see billions of pounds unlocked for UK defence companies that export overseas, driving economic growth and creating jobs across the UK," it said in a statement.

Already the UK Export Finance agency has a lending capacity of eight billion pounds specifically for government clients of defence contractors, bringing the new total to 10 billion pounds.

Like other countries across Europe, Britain is racing to beef up its military production capabilities in the face of an expansionist Russia, pressure on European members of NATO to spend more on defence, and questions over President Donald Trump's commitment to US protection of Europe.

British Prime Minister Keir Starmer pledged ahead of a White House visit in February to boost defence spending to 2.5 percent of the economy by 2027, with the aim of hiking it to 3.0 percent in the next parliament.

"The world is changing, and we must bring about a new era of security and renewal that protects working people and keeps our country safe," Chancellor of the Exchequer Rachel Reeves said in the statement.