Banks close accounts of defense workers, government warns

The Ajax tank was built for the British Army by defense contractor DE&S. Credit: Jack Eckersley/DOD

Banks faces DOD investigation after defense contractors' bank accounts closed.

The DOD launched an investigation after dozens of defense companies complained they were being denied banking services or charge higher rates due to the nature of their job.

Defense experts blame the rise of environmental, social protection and governance (ESG) policies that encourage firms to invest «ethically».

James Cartlidge, Secretary of Defense Acquisition, is in talks with ADS, Trade organization representing 1,200 firms in the aerospace, defense and space industries to discuss how the government can end this practice.

Ministers are concerned that this could jeopardize jobs and undermine the competitiveness of a sector that employs 417,000 people and supplies equipment to the Armed Forces.

“Russia's illegal invasion has shown why we must advocate for a strong defense industry. , without which we would not have been able to provide Ukraine with the means to defend its freedom,” said Mr. Cartlidge.

“Defense enterprises large and small told me that ESG rules undermined them due to more expensive funding . to the denial of basic banking services.

«We are currently looking into the extent of this problem, but I am confident that a strong defense industry is supporting well-paying jobs across the UK and allowing our armed forces to keep us safe in dangerous times.»

More firms are struggling to attract capital

Small defense businesses are denied opening accounts or are told that existing accounts will be closed and their balance returned.

They have also been denied insurance while larger firms struggle to raise capital. ADS research found that the share of investment funds that exclude the defense sector on ethical grounds has risen from 59% in 2021 to 91% this year.

An ADS spokesperson said: “The aerospace and defense sectors are already facing limited access to investment and financial services due to investor concerns about ESG performance or other reputational risks.

“Our small and medium enterprises face unprecedented barriers to accessing the finance they need. This can range from large investment rounds to difficulties in accessing basic business banking services due to overinterpretation of risks by banks. protection plays a vital role.”

Regulations review

This comes amid a scandal over the closure of “politically exposed persons” (PEP) accounts after several public figures, including Nigel Farage, complained that their accounts were closed without warning.

Treasury officials have ordered the Financial Conduct Authority (FCA), the city's watchdog, to urgently revise the rules on politically exposed persons.

Andrew Griffith, Secretary of State for the Economy Treasury, wrote to the FCA asking the FCA to expedite the revision of the rules.

«Given the strong concerns on this matter, I expect the FCA to prioritize this important revision over the coming months and if there are any along the way» easy victories”, we will quickly implement them,” he said.