Employment growth is set to drive significant expansions in industrial and logistics demand
Determining the ratio of square feet per billion pounds of spending can be complex, as it varies based on the specific needs and scale of operations. However, industry benchmarks suggest that for every £1 billion spent, approximately 100,000 to 150,000 sq ft of industrial space is required. This ratio can fluctuate depending on the type of facilities needed, such as manufacturing plants, research labs, and secure storage units.
Taking industry standard usage densities, we find that B2 category jobs (general industrial/manufacturing) typically require 36 sq m of floor space per employee. B8 category jobs (storage and distribution) are assumed to require 79 sq m of floor space per employee. These guidelines are used in planning applications and can be used to estimate the required floor space needed based on our forecasts of employment growth.
Defence manufacturing, however, often requires specialised facilities – such as heavy cranes, secure perimeters, and testing ranges – meaning typical industrial sites may not be suitable. Nevertheless, the following figures give a sense of the order of magnitude of real estate needed. Expanding production of complex defence systems (like submarines or fighter jets) can be particularly space-intensive – for example, BAE’s submarine shipyard extension in Barrow for the Dreadnought programme involves huge construction halls to accommodate the build of nuclear subs, each hall covering hundreds of thousands of square feet.
It is also worth considering that defence logistics often requires specialised storage needs: for example, climate-controlled warehouses for electronics, armouries for weapons storage, explosive storage magazines for munitions (which have stricter siting and spacing requirements), etc. While these facilities follow general employment density logic, their location and design are often constrained by safety and security requirements.
Using our current estimate of 79,300 manufacturing jobs and the B2 density: Current defence manufacturing footprint: 79,300 jobs × 36 sq m/job ≈ 2,854,800 sq m of industrial floorspace utilised.
The SDR will add new manufacturing jobs. For example, the new munitions factories (1,000 jobs) will require about 1,000 × 36 = 36,000 sq m of industrial space – indeed, construction of those factories will create that much or more in new floorspace. The plan to support an additional 800 long-range weapons production jobs implies 800 × 36 = 310,000 sq m of additional production space.
If defence spending rises to 2.5% of GDP, an increase of 12.1% by the end of 2027, we have estimated that direct manufacturing jobs will rise by between 8,550 and 9,600, generating an additional 308,000 to 346,000 sq m of demand. This would represent a more than 10% uplift in industrial take-up compared to 2023 or 2024.
If defence spending rises to 3.0% of GDP, an increase of 34.5% by the end of the next UK parliament term (which we proxy as being in 2034), we’ve estimated that defence-related manufacturing jobs will rise by between 24,370 and 27,380, generating an additional 877,000 to 986,000 sq m of demand. This would need to play out over the course of eight years, and thus would lead to an average uplift of 123,000 sq m. More explosive growth would be seen under the 3.5% NATO scenario, which would generate additional demand of 1.4 to 1.6 million sq m over a seven-year time frame, equating to up to 232,000 sq m per year, on average.
While in the 3.5% scenario, over seven years, we would expect to see an annual average uplift of between 643,000 and 1.3 million sq m of space
Andrew Blennerhassett, Associate Director, Commercial Research
Traditional logistics will also see a major impact from these increases in spending. Notably, this is dependent on our assumptions around the relationship between MOD spending and logistics employment. For these calculations, we will provide a range between the 0.49 correlation, assuming that growth in employment is half of that of expenditure and a one-for-one increase in demand.
Using our current estimate of 29,800 logistics jobs and the B2 density, the current defence manufacturing footprint: 29,800 jobs × 79 sq m/job ≈ 2.4 million sq m of logistics floorspace utilised. In 2027, we would expect to see additional requirements of 137,000 to 285,000 sq m to accommodate rising direct and indirect logistics demand from MOD spending.
Looking further out at the long-run 3.0% goal, we would expect additional logistics demand of between 390,000 and 813,000 sq m over eight years, an average increase in demand of between 49,000 and 102,000 sq m. While in the 3.5% scenario, over seven years, we would expect to see an annual average uplift of between 643,000 and 1.3 million sq m of space.
Combining demand from the two sectors, we get the following:
In 2027, given the sharp increase in spend, we would expect to see between 444,000 and 631,000 sq m of direct and indirect manufacturing and logistics demand. By 2034, if the Government holds through its stated course, we expect to see between 1.3 and 1.8 million sq m of space, or 158,000 to 225,000 sq m per year over eight years. Finally, if the UK commits to and meets the new NATO targets, we expect to see an increase in demand of 2.1 million to 3.0 million sq m. This would equate to 299,000 to 424,000 sq m of extra demand per year. Looking at the long-term targets, we would expect to see an uplift in demand for industrial and logistics space of between 6% and 15% of the long-run average annual take-up in the UK.
There are a number of factors that we have omitted from the calculation that could additionally boost demand. Firstly, our model does not account for GDP growth. If we assume that UK GDP growth starts to recover more strongly in 2026, then spending on defence would have to grow at a corresponding rate to maintain its share of GDP.
Secondly, we have not accounted for the positive impact of GDP growth and employment growth on overall private consumption. Job creation of this scale will boost wages not just for those employed in the sector but also put upward pressure on other sectors, which will need to compete for talent with the defence sector. The jobs created by the sector are typically high-skilled jobs that will command above-average salaries regionally, boosting incomes in the regions in which these jobs are located.
Finally, we have focused purely on our domestic production and MOD-supported employment. The SDR sets out to increase government-to-government sales of British defence equipment. This will help to maintain public funds for sustained spending. Crucially, the ADS industry group estimates that, in addition to domestic production, an additional 30,000 jobs are currently supported by the export market.
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