Building the UK's defence future
The UK's defence innovation drive will spur investment and regional expansion
4 minutes to read
In response to mounting geopolitical tensions, The UK is significantly increasing its defence expenditure, emphasising research and development (R&D). Currently, the UK's Ministry of Defence (MOD) dedicates approximately 5% of its budget—around £2.6 billion annually—to R&D. However, this could go up to 7% or more by 2030.
Central to this initiative is the Defence Science and Technology Laboratory (Dstl) based at Porton Down, which will continue to lead most R&D projects and programmes. However, a newly established Defence Innovation Organisation, set to launch this spring, will streamline what has been described as a previously fragmented innovation landscape. This agency will foster cutting-edge technological advances and create high-skilled employment across the UK.
The innovation drive also anticipates increased backing for defence-oriented start-ups through vehicles like the National Security Strategic Investment Fund. Ministers will work with the private venture capital and broader investment sector, as well as industry, to encourage further funding. Despite broader isolationist tendencies observed in the United States, the UK is actively strengthening international collaborations related to R&D, particularly with European allies.
The MOD identified strategic priorities encompass emerging technologies such as artificial intelligence (AI), autonomous systems, cyber and space technologies, advanced materials, quantum computing, air systems, chemical biological and radiological defence , communications and networks, robotics, deterrent and submarine systems, electromagnetic activities, future kinetic effects and weapons, novel sensing concepts, human performance and protection, hypersonics, advanced land and marine systems, and engineering biology.
AI, in particular, is integral to multiple high-profile programmes, including the Future Combat Air System (the UK's next-generation fighter project), supported by dedicated initiatives such as the Defence AI Strategy and the Centre for Artificial Intelligence.
In the cyber sector, the joint GCHQ-MOD National Cyber Force (NCF) aims to position the UK as a responsible leader in cyberspace. The NCF's new campus in Samlesbury, Lancashire, anchors a growing cyber tech cluster in North West. It is expected to create 2,000 direct jobs and potentially 6,000 more throughout the supply chain.
Environmental sustainability has also become a defence priority. The Royal Air Force (RAF), as a significant fuel consumer within the MOD, began trials with biofuels and sustainable aviation fuels (SAF), mandating SAF components in all procured aviation fuel by January 2025. This aligns with the government's "Jet Zero" strategy, targeting net-zero aviation emissions and enhanced energy security.
Advanced materials research is also gaining traction. The £42.5 million Defence Materials Centre of Excellence, established by Dstl alongside 23 academic and industry partners, focuses on developing materials resilient to extreme operational conditions, ranging from intense heat to corrosive environments. The Henry Royce Institute in Manchester is leading the centre of excellence.
In space, the formation of the UK Space Command and the associated Space Academy underscores Britain's commitment to developing next-generation satellite technologies and related skillsets.
Increased investment in R&D also has broader implications, influencing innovation across various scientific and technological fields through supply chain effects. The government, for instance, has highlighted the defence sector's role as a "market-shaping" customer capable of accelerating advancements in specialised semiconductor technology.
The rise in defence R&D expenditure will drive demand for real estate infrastructure, creating opportunities for those on the supply side of real estate. Identifying precisely where these opportunities exist will require an in-depth analysis of national and regional defence innovation ecosystems. Measures undertaken to achieve this include:
Clustering activity amongst industry players - Favoured locations for innovation-focused defence companies, as identified by Beauhurst, are the South East, London , and the South West. The West Midlands and East of England round out the top five.
Mapping MOD infrastructure - New and upgraded MOD facilities, such as the experimentation and wargaming hub in Hampshire and QinetiQ's electronic warfare testing chamber at Boscombe Down, will anchor regional economic development.
Analysing R&D infrastructure investments by established industry leaders - Major defence contractors like Leonardo are already aligning with the MOD's strategic direction, with significant increases in their R&D spending and facilities. Leonardo's investment in a science and engineering hub in Newcastle highlights the economic potential of such investments. The company also reported that its R&D spending in the UK doubled since 2018, reaching nearly £500 million in 2023.
Getting close to government policy - Local enterprise partnerships actively nurture these clusters; Lancashire's burgeoning "Cyber Corridor", Dorset's defence innovation cluster centred around the Defence Battlelab and the South West Regional Defence and Security Cluster exemplify targeted regional development strategies. The anticipated UK industrial strategy is expected to further clarify the government's cluster investment priorities.
The historical concentration of defence R&D within closed-off government sites and corporate campuses is shifting, increasingly integrating into wider science parks and innovation hubs. The UK's bold commitment to defence R&D will directly drive demand for real estate, encompassing the expansion of MOD facilities, growth in established firms' R&D infrastructure, and the further integration of defence technology into broader scientific and innovation communities. As one Leonardo UK executive remarked, the defence-tech sector serves as "an engine for economic growth, prosperity and security," capable of generating thousands of skilled jobs across Britain.