As /u/tpahornet has alluded to below, budgetary constraints left the British and French hamstrung during the Great Depression. Germany was very different, embracing deficit spending of a Keynesian nature, but this was solely for the purpose of arming Germany for war; nothing to do with peaceful reconstruction, no matter what those like Lloyd-George convinced themselves it was. In Britain, the Armed Forces were bound to the Ten Year Rule; every year, it was to be assumed that the UK should not expect a war within the next ten years, and so funding was given accordingly.
By 1939, the British and French were rapidly re-arming. A BEF was soon in place to be sent to France, and the Maginot line was nearing completion. Both countries had large air forces, but the Royal Navy in particular was at a disadvantage because of earlier adherence to the Washington Arms limitation treaty. By September 1939 however, Germany was spending c. 60% of it's budget on the military, and only managed to survive the subsequent years by going to war to plunder it's neighbours.
Adam Tooze's Wages of Destruction is required reading for the economic history of WWII; as good a place to start as any!
The British could and did start to re-arm by 1936.
Here is British Defence spending during the 1930s:
1930 - 119m pounds
1931 - 117m
1932 - 113m
1933 - 111m
1934 - 116m
1935 - 122m
1936 - 146m
1937 - 195m
1938 - 206m
1939 - 266m
1940 - 644m
http://www.ukpublicspending.co.uk/year_spending_1940UKmn_14mc1n_30#ukgs302
So, despite Churchill urging more UK defence preparedness since 1933, the UK only started to ramp up Defence spending in 1936, but they did not really put the whole country on a war time economy until 1940.
As part of the build up of the RAF, for example, the Hawker Hurricane, Britain's first monoplane fighter, was first flown in late 1935, and was introduced into service in December 1937.
The superior Supermarine Spitfire first flew in March 1936 and was introduced into service in August 1938.
On the bomber side of the RAF buildup, the Whitley was introduced in 1937, the Beaufort in 1939, the Blenheim in 1937, the Battle in 1937, the Fairey Swordfish torpedo bomber in 1936, the Hampden in 1938, and the Wellington in 1938.
Another build up effort, key to the air war, was the building of two networks of radar stations across the South and South East coasts of England in the mid to late 1930s.
So, there was a lot of investment in building up a new bomber and fighter force in the late 1930s.
The Royal Navy build up only got started once the limitations of the 1922 Washington Treaty and the 1930 London Treaty expired at the end of 1936. By 1939, Britain's dockyards and shipyards were full, building 200 new naval vessels. Nine battleships, Six Aircraft Carriers, 25 Cruisers, 43 Destroyers 19 submarines, and a number of other or smaller naval ships were being built.
http://www.globalsecurity.org/military/world/europe/uk-rn-policy4.htm
The Army got the lowest priority in the defence build up.
So, the UK started to re-arm in 1936. The build up may not have been early enough or fast enough.
Britain might also be accused of re-arming for the wrong war. The Royal Navy would have been better off investing in more aircraft carriers and anti submarine warfare and fewer battleships, cruisers, and submarines. The RAF might have been better off investing less in bombers (most of the first wave of re-armament bombers were not very good and were replaced by better bombers later in the war).
Luckily Britain invested wisely in fighters and radar systems.
If I am not mistaken it was because of a depression throughout Europe and in the US that countries did not spend on their military. They were having trouble just keeping their people fed and trying to Jumpstart their economies.