Looking ahead, if we assume that employment keeps pace with the increase in expenditure, we can calculate estimated employment growth based on the increase in defence spending as a percentage of GDP
To forecast employment, we assume that the share of manufacturing and logistics employment as a percentage of total employment will remain stable. In the context of the UK rearming and building greater munition production capacity, we would expect manufacturing’s share of employment to remain stable, if not increase, with a similar impact on logistics.
Considering the three scenarios for expenditure growth – namely, the 2.5% of GDP promised for 2027, the aspirational 3.0% target outlined in the SDR, and the new NATO target of 3.5% – we can calculate the potential impact on employment. In 2027, we estimate that manufacturing employment will grow by 9,600 jobs to facilitate greater demand from the MOD, with logistics employment growing by 3,600 jobs to accommodate this increase in the flow of materials.
Extrapolating this to the 3.0% long-run target expected in the next parliament, we would see job growth of 27,380 for manufacturing relative to 2022/2023, and an additional 10,290 logistics jobs to support them. Finally, while the UK is yet to commit to the new targets set out by the June 2025 NATO summit, we assume a scenario of 3.5% of GDP on core defence spending. If the UK government were to reach this level, we could see employment grow by 45,160 and 16,970 jobs in manufacturing and logistics, respectively, compared to current levels.
Taking a less optimistic view and applying the historical relationship between defence spending and jobs growth, with correlations of 0.89 and 0.48 for manufacturing and logistics, we would expect to see employment grow from between 8,550 and 40,190 jobs for manufacturing and 1,730 and 8,150 jobs for logistics in the 2.5% and 3.5% scenarios.
Read the other articles within the report below:
