From the graph below, we can see that direct manufacturing employment is regionally concentrated, with the North West, South West, Scotland, and the South East accounting for 77% of total direct manufacturing employment. The logistics sector is concentrated in the South West and South East, though it is worth noting that logistics employment is primarily seen through indirect employment, and in the absence of this data from the ONS, we would assume that it is more evenly spread to support the manufacturing sector.

This heavy regional concentration reflects agglomeration economies at work: defence firms and their suppliers tend to cluster together, benefitting from shared skilled labour pools, specialised subcontractors, and established supply chains. These clustering benefits not only concentrate employment but also create competition for industrial and logistics space in those hub areas as companies expand production and distribution facilities to support growing programmes.

North West

The North West represents an aerospace and weapons cluster, with the region being regarded as “the centre of complex weapons manufacturing for the UK” by industry leadership. BAE is particularly active in the region, with its sites in Lancashire building advanced combat aircraft such as Typhoon jets and F-35 components. Notably, the North West stands to gain significantly, given the SDR’s commitment to modernising the RAF’s jets. Similarly, Barrow-in-Furness shipyard in Cumbria, which constructs nuclear submarines, can also be expected to see an uplift in employment and demand. Indeed, the MOD recently opened an 820,000 sq ft equipment depot in the region.

South West

The South West hosts a second crucial defence cluster, with a rich aerospace and naval engineering ecosystem which is home to the only helicopter plant in the UK. According to Leonardo, a firm specialising in helicopters, the South West is the largest cluster of aerospace and related industries in the UK. The South West also leads in direct logistics-related employment at 30% of the total, indicating many depots and support centres are clustered to serve the industry.

South East

The South East accounts for 14% of direct defence manufacturing jobs and is integral to the UK’s nuclear arsenal, with the Atomic Weapons Establishment (AWE) in Aldermaston, Berkshire, manufacturing and maintaining the UK’s nuclear warheads. The region benefits from its proximity to London and major research centres, but it is less densely clustered compared to other regions.

Scotland

Finally, Scotland, which also accounts for 14% of total employment in the sector, is home to historic shipbuilding sites as well as a growing tech industry. In addition to various models of frigates manufactured by BAE Systems, Scotland is a centre for defence electronics and sensors. The production of cutting-edge radar systems for aircraft in Edinburgh and periscopes and optronics for submarines in Glasgow has created a tight ecosystem over a handful of locations, which require skilled trades and engineering experience.

As spending rises, we would expect to see these locations, in particular, benefit from the projected increases in demand created by the SDR. When large defence contractors concentrate in an area, their numerous suppliers, maintenance providers, and transport partners also cluster nearby to serve them efficiently. This results in localised supply chain hubs that benefit from reduced transportation costs and quicker communication – classic advantages of agglomeration economies in manufacturing.

As these ecosystems grow, they generate heavy demand for additional industrial units and warehouses: parts makers set up workshops close to the big assembly plants, logistics firms open depots to handle inventory and distribution, and the primes themselves invest in larger facilities to increase output. In effect, the geographic clustering of defence manufacturing in the North West, South West, South East, and Scotland will directly drive the need for more industrial and logistics space in those areas to future-proof the MOD’s planned spending increases.

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