The largest military investment in 30 years is set to be announced by the prime minister – an extra £4bn a year over the next four years.
The money will fund space and cyber defence projects such as an artificial intelligence agency, and could create 40,000 new jobs, the government said.
Boris Johnson said it would help the UK to “bolster our global influence”.
The Ministry of Defence’s annual budget is around £40bn, so the £16.5bn over four years is about a 10% increase.
The extra spending is on top of the Conservatives’ 2019 manifesto commitment.
Then, the government pledged to increase defence spending by 0.5% above the inflation rate, which is currently at 0.7%, for every year of the current Parliament.
So based on forecasts of inflation, the government said it expects the Ministry of Defence (MoD) to get a total overall increase of about £24.1bn over four years, compared with last year’s budget.
Mr Johnson said on Wednesday evening that he was making the announcement “in the teeth” of the coronavirus pandemic because “the defence of the realm must come first”.
“The international situation is more perilous and more intensely competitive than at any time since the Cold War,” he added.
The PM said in order for Britain to “be true to our history and stand alongside our allies” it must make improvements “across the board”.
“This is our chance to end the era of retreat, transform our armed forces, bolster our global influence, unite and level up our country, pioneer new technology and defend our people and way of life,” he said.
This is a big win for Defence Secretary Ben Wallace, who’s been fighting hard for a significant increase in defence spending and a long-term financial settlement to end what he calls a cycle of overambitious, under-funded defence reviews of the past.
The Treasury had been arguing for a much smaller annual increase. But Mr Wallace found an ally in the PM, who says his first priority is defence of the realm.
Boris Johnson also believes it’ll boost Britain’s place in the world and create jobs.
The extra money will be used to modernise the armed forces with more spent on robots, autonomous systems and meeting new threats in the domains of space and cyber.
Despite the palpable relief inside the MoD it still has to fill a £13bn black hole in its equipment budget. Difficult decisions about cutting old equipment to fund the new are still to be made.
The MoD, which doesn’t have a strong track record of balancing its books, now has to prove it can spend wisely.
And good news for defence might also mean bad news for other government departments – there’s already speculation the international aid budget could be cut.
The prime minister will set out further details in a virtual speech to the House of Commons on Thursday.
He will do so from 10 Downing Street, where he continues to self-isolate after coming into contact with an MP who later tested positive for Covid-19.
As part of the speech, Mr Johnson will announce:
The projects are expected to create up to 10,000 jobs annually across the UK, for the next four years, the government said.
Defence Secretary Ben Wallace said the jobs and business opportunities being created by the investment would bring “prosperity to every corner of the UK”, helping the country to “build back” from the coronavirus pandemic.
The announcement is part of the first conclusions of the government’s Integrated Review which looks at security, defence, development and foreign policy.
Labour’s shadow defence secretary John Healey said the extra money would give “a welcome and long-overdue upgrade to Britain’s defences after a decade of decline”.
He also called for highly trained troops to be “at the heart” of the review, above high-tech weapons systems.
“Ministers must not repeat the mistakes of the last two Conservative defence reviews,” he said.