UK space and defence sectors face growth and scaling challenges

The United Kingdom's space and defence sectors are experiencing significant growth, yet both face structural hurdles. The space industry has created over 55,000 jobs and contributes substantially to the economy, with hubs like Glasgow and Guildford leading in small satellite production. However, the sector struggles with scaling; while the UK ranks third globally for the number of space investments, it ranks 17th for the size of individual deals, often forcing startups to seek foreign buyers to expand.

Simultaneously, the expanding UK defence sector is driving demand for manufacturing, R&D, and logistics space. Defence contractors are increasingly seeking precision engineering units and secure facilities due to rising government spending and a focus on domestic manufacturing resilience. Despite this demand, the commercial property market is struggling to accommodate these occupiers. Challenges include landlord and institutional funder hesitation due to ESG mandates or reputational concerns regarding military technology, which can lead to restrictive lease terms and slower procurement processes.