The UK must rebuild its military and get the whole country ready for war as the threat of conflict with a nuclear power like Russia or China is real, a major defence review warns.
It described what might happen should a hostile state start a fight, saying this could include missile strikes against military sites and power stations across the UK, sabotage of railway lines and other critical infrastructure and attacks on the armed forces.
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PM challenged on NATO, defence and Gaza
In a devastating verdict on the state of Britain’s defences, the Strategic Defence Review (SDR) said today’s armed forces are “not currently optimised for warfare”, with inadequate stockpiles of weapons, poor recruitment and crumbling morale.
“The international chessboard has been tipped over,” a team of three experts that led the review wrote in a foreword to their 140-page document.
“In a world where the impossible today is becoming the inevitable tomorrow, there can be no complacency about defending our country.”
Image: British soldiers from the 16 Air Assault Brigade training in North Macedonia. Pic: AP
Sir Keir Starmer, who commissioned the review, described a “new era” of threat that required a “new era for defence and security”.
“Every part of society, every citizen of this country, has a role to play because we have to recognise that things have changed,” the prime minister said.
The review made a list of more than 60 recommendations to enable the UK to “pivot to a new way of war”.
They include:
Increasing the size of the army by 3,000 soldiers to 76,000 troops in the next parliament. The review also aims to boost the “lethality” of the Army ten-fold, using drones and other technology.
A 20% expansion in volunteer reserve forces but only when funding permits and likely not until the 2030s.
Reviving a force of tens of thousands of veterans to fight in a crisis. The government used to run annual training for the so-called Strategic Reserve in the Cold War but that no longer happens.
Embracing new technologies such as artificial intelligence, robots and lasers. The paper said the UK must develop ways to defend against emerging threats such as biological weapons, warning of “pathogens and other weapons of mass destruction”.
The possibility of the UK buying warplanes that could carry American nuclear bombs to bolster the NATO alliance’s nuclear capabilities. The review said: “Defence should commence discussions with the United States and NATO on the potential benefits and feasibility of enhanced UK participation in NATO’s nuclear mission.”
The expansion of a cadet force of children by 30% and offering a “gap year” to people interested in sampling military life.
New investment in long-range weapons, submarines, munitions factories and cyber warfare capabilities.
General Sir Richard Barrons, part of the review team and a former senior military officer, described the vision as “the most profound change” to UK defences in 150 years.
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This includes only a brief mention of bolstering the UK’s ability to defend against cruise and ballistic missiles – a key weakness but one that would be very expensive to fix.
Earlier, Sir Keir said the review was a “blueprint to make Britain safer and stronger, a battle-ready armour-clad nation, with the strongest alliances and the most advanced capabilities, equipped for the decades to come”.
Defence Secretary John Healey, writing in a foreword to the document, said “up to” ÂŁ1bn would be invested in “homeland air and missile defence” as well as the creation of a new cyber and electromagnetic warfare command.
The review was drawn up with the expectation that defence spending would rise to 2.5% of GDP this parliament – up from around 2.3% now – and then to 3% by 2034. The government has pledged to hit 2.5% by 2027 but is yet to make 3% a cast iron commitment.
The reviewers said their recommendations could be delivered in 10 years if that spending target is reached but they gave a strong signal that they would like this to happen much sooner.
“As we live in such turbulent times it may be necessary to go faster,” the team said.
“The plan we have put forward can be accelerated for either greater assurance or for mobilisation of defence in a crisis.”
The review described the threat posed by Russia as “immediate and pressing”.
It said China, by contrast, is a “sophisticated and persistent challenge”.
It pointed to Beijing’s growing missile capability that can reach the UK and said the Chinese military’s nuclear arsenal is expected to double to 1,000 nuclear warheads by 2030.
The other two reviewers were Lord George Robertson, a former Labour defence secretary, and Fiona Hill, a Russia expert and former foreign policy adviser to Donald Trump.
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The review team warned the post Cold War-era of relative peace has ended and a time of contest, tension and conflict has returned.
Adding to the pressure, the US – by far the most powerful member of the NATO alliance – is focusing more on the threat it sees from China.
“Changes in the strategic context mean that NATO allies may be drawn into war with – or be subject to coercion by – another nuclear armed state,” the review said.
“With the US clear that the security of Europe is no longer its primary international focus, the UK and European allies must step up their efforts”.
The review set out how defence is not only the responsibility of the armed forces because countries – not just the professional military – fight wars.
It said: “Everyone has a role to play and a national conversation on how we do it is required⊠As the old saying goes, ‘If you want peace, prepare for war’.”
Sky News and Tortoise will launch a new podcast series – The Wargame – on 10 June that simulates a Russian attack on the UK to test Britain’s defences, with former ministers and military chiefs playing the part of the British government.
With US President Donald Trump threatening to sue the BBC, how likely is the broadcaster to pay out? And how have those across the political spectrum been reacting?
And with 15 days until Chancellor Rachel Reeves’s budget, Matthew McGregor – the chief executive of campaign group 38 Degrees and a former digital strategist for both Labour and Barack Obama – takes issue with Sam’s take from yesterday and sends in a voice note.
And Sam and Anne discuss the latest twist in the Your Party saga, and it’s all about money.
Brazilâs central bank completed rules that bring crypto companies under banking-style oversight, classifying stablecoin transactions and certain self-custody wallet transfers as foreign-exchange operations.Â
Under Resolutions 519, 520 and 521, published Monday, the Banco Central do Brasil (BCB) established operational standards and authorization procedures for what it calls Sociedades Prestadoras de Serviços de Ativos Virtuais (SPSAVs), a new category of licensed virtual-asset service providers operating in the country.Â
The framework extends existing rules on consumer protection, transparency and Anti-Money Laundering (AML) to crypto brokers, custodians and intermediaries.Â
The rules will take effect on Feb. 2, 2026, with mandatory reporting for capital-market and cross-border operations set to begin on May 4, 2026.Â
Stablecoins under foreign exchange rules
Under Resolution 521, a purchase, sale or exchange of fiat-pegged virtual assets, including international transfers or payments using such assets, will be treated as foreign-exchange (FX) operations.Â
With this classification, stablecoin activity will be subject to the same scrutiny as cross-border remittances or currency trades.Â
Licensed FX institutions and the new SPSAVs will be able to perform these operations, subject to documentation and value limitations. According to the BCB, transactions with unlicensed foreign counterparts will be capped at $100,000 per transfer.Â
The rules also cover transfers to and from self-custodied wallets when intermediated by a service provider. This means that providers must identify the walletâs owner and maintain their processes that verify the origin and destination of the assets, even if the transfer itself isnât cross-border.Â
This provision extends AML and transparency obligations to areas previously considered outside the scope of regulated finance.
While the rules donât explicitly ban self-custody, they close a key reporting gap, forcing regulated exchanges and brokers to treat wallet interactions like formal FX operations.Â
BCB says the goal is to promote efficiency and legal certainty
In the announcement, the BCB said its goal is to ensure âgreater efficiency and legal certainty,â prevent regulatory arbitrage and align crypto activities with the countryâs balance-of-payments (BoP) statistics, which means making stablecoin transfers visible in official financial data.Â
The move follows months of public consultation and growing concern from the central bank on the dominance of stablecoin use in Brazil. On Feb. 7, BCB President Gabriel Galipolo said that around 90% of crypto activity in Brazil involved stablecoins, mainly used for payments.
Galipolo said the widespread use of stablecoins in payments presented regulatory and oversight challenges, particularly in areas such as money laundering and taxation.Â
Brazilâs central bank said the new framework aims to curb scams and illicit activity while providing legal clarity to crypto markets.Â
For crypto builders, this may raise compliance costs and reshape how local platforms interact with global liquidity. Smaller crypto players will be forced to compete with bigger institutions and meet more stringent banking-grade standards.Â
The rules will take effect in February 2026, but market participants are expected to start restructuring before then.Â
For Brazil, where crypto activity is second only to Argentina in Latin America, the new regulations signal a decisive shift from experimentation to integrated oversight.
The new rules show that crypto is welcome in the Brazilian financial ecosystem, but it will have to play by the same rules as fiat money.Â
Institutional investors are maintaining confidence in digital assets despite a sharp market correction in October, with most planning to expand their exposure in the months ahead, according to new research.
Over 61% of institutions plan to increase their cryptocurrency investments, while 55% hold a bullish short-term outlook, Swiss crypto banking group Sygnum said in a report released on Tuesday. The survey covered 1,000 institutional investors globally.
Roughly 73% of surveyed institutions are investing in crypto due to expectations of higher future returns, despite the industry still recovering from the record $20 billion market crash at the beginning of October.
However, investor sentiment continues facing uncertainty due to delays in key market catalysts, including the Market Structure bill and the approval of more altcoin exchange-traded funds (ETFs).
While this uncertainty may carry over into 2026, Sygnumâs lead crypto asset ecosystem researcher, Lucas Schweiger, predicts a maturing digital asset market, where institutions seek diversified exposure with long-term growth expectations.
âThe story of 2025 is one of measured risk, pending regulatory decisions and powerful demand catalysts against a backdrop of fiscal and geopolitical pressures,â he said, adding:
âBut investors are now better informed. Discipline has tempered exuberance, but not conviction, in the marketâs long-term growth trajectory.âÂ
Despite Octoberâs correction, âpowerful demand catalystsâ and institutional participation remained at an all-time high, with the growing ETF applications signaling more institutional demand, added Schweiger.
Crypto staking ETFs may be the next institutional catalyst
Crypto staking ETFs may present the next fundamental catalyst for institutional cryptocurrency demand.
Over 80% of the surveyed institutions expressed interest in crypto ETFs beyond Bitcoin (BTC) and Ether (ETH), while 70% stated that they would start investing or increase their investments if these ETFs offered staking rewards.
Staking means locking your tokens into a proof-of-stake (PoS) blockchain network for a predetermined period to secure the network and earn passive income in exchange.
Meanwhile, investors are now anticipating the end of the government shutdown, which could bring âbulk approvalsâ for altcoin ETFs from the US Securities and Exchange Commission, catalyzing the ânext wave of institutional flows,â according to Sygnum.