MoD identifies possible UK sites for making explosives and ammunition
MoD identifies possible UK sites for making explosives and ammunition
The UK Ministry of Defence has identified at least a dozen disused oil refineries and chemical plants as potential sites for manufacturing explosives and ammunition. Locations under consideration include Grangemouth, Southampton, and Teesside. The initiative is part of a planned multibillion-pound investment aimed at strengthening the UK's domestic defence production capabilities.
Context & What Changed
The UK Ministry of Defence's (MoD) identification of specific industrial sites for munitions manufacturing marks a significant shift from strategic intent to tangible action. For over two decades, Western defence policy has been characterized by just-in-time supply chains, capability-based procurement, and a drawdown of heavy industrial capacity following the Cold War. The full-scale invasion of Ukraine in 2022 exposed the profound fragility of this model. The conflict's high-intensity, attritional nature has led to consumption rates of artillery ammunition and other munitions that have dwarfed Western production capacity, rapidly depleting national stockpiles (source: CSIS). In response, NATO members have collectively recognized the urgent need to rebuild their defence industrial bases. The UK government has committed to increasing defence spending to 2.5% of GDP (source: gov.uk), creating the fiscal headroom for major new investments.
What has changed with this announcement is the transition from abstract policy to concrete industrial planning. Previously, discussions focused on increasing orders with the UK's primary sovereign munitions provider, BAE Systems, which operates key facilities at Glascoed in Wales and Radway Green in Cheshire (source: baesystems.com). This new development signals a much broader, more ambitious strategy. By identifying large, disused brownfield sites like former refineries and chemical plants, the MoD is contemplating a step-change in scale and scope. This involves not just assembling ammunition but potentially re-shoring the production of precursor chemicals and explosives, such as nitrocellulose and RDX, which are critical bottlenecks in the current supply chain. This move acknowledges that simply funding existing production lines is insufficient; a fundamental expansion and modernization of the UK's sovereign industrial capacity is required to meet the demands of a new era of geopolitical competition.
Stakeholders
UK Government: The Ministry of Defence is the primary stakeholder, driven by the need for national security and strategic autonomy. HM Treasury is a critical enabler and gatekeeper, responsible for approving the 'multibillion-pound' expenditure and scrutinizing the value-for-money proposition. The Department for Business and Trade will be involved in shaping the industrial strategy, attracting private investment, and managing supply chains. The Cabinet Office will coordinate the cross-government effort under the umbrella of national resilience.
Defence Industry (Primes & Supply Chain): BAE Systems, as the incumbent onshore ammunition producer, is a central stakeholder. It could be a partner, operator of new sites, or face competition. Major European and US defence firms, such as Rheinmetall and KNDS, will see this as a significant opportunity to expand their UK footprint, potentially bringing investment and technology. A vast ecosystem of smaller SMEs in engineering, logistics, and chemical manufacturing will form the critical supply chain.
Regional & Devolved Governments: The Scottish Government (for Grangemouth) and local authorities in areas like Teesside and Southampton are key stakeholders. Their interests include job creation, regional economic regeneration (aligning with the 'levelling up' agenda), infrastructure development, and managing environmental and planning regulations. Their cooperation is essential for securing planning permissions and local support.
Industrial & Infrastructure Sectors: Owners of the identified brownfield sites (e.g., chemical and energy companies) are direct stakeholders, as potential sellers or partners. The UK's construction and engineering sectors will be essential for the design, build, and commissioning of these complex, highly regulated facilities. Infrastructure investors and funds will be key if a Public-Private Partnership (PPP) model is pursued.
NATO Allies: The UK's actions are closely watched by allies. A stronger UK defence industrial base enhances NATO's collective deterrence and resilience. This initiative could lead to integrated supply chains, joint procurement programs, and the UK becoming a key munitions supplier for other European nations, reflecting initiatives like the EU's Act in Support of Ammunition Production (ASAP) (source: ec.europa.eu).
Evidence & Data
The MoD's plan is underpinned by the stark reality of modern warfare. Pre-2022, the UK's total annual production of 155mm artillery shells was estimated to be in the low tens of thousands. In contrast, Ukrainian forces have at times expended that amount in a matter of weeks (source: RUSI). This production/consumption deficit is the core driver of the policy.
The choice of sites—Grangemouth, Southampton, Teesside—is strategic. These are large industrial areas with existing infrastructure, skilled labour pools in related fields (chemicals, engineering), and port access for logistics. They are brownfield sites, which can streamline planning compared to greenfield development, though they may require significant remediation.
The investment is described as 'multibillion-pound' (source: The Guardian). For comparison, Rheinmetall is building a new ammunition plant in Germany for approximately €300 million, intended to produce 200,000 artillery shells per year (source: Reuters). The UK's ambition, likely encompassing not just shell filling but also propellant and explosives production across multiple sites, suggests a total investment envelope of £2-5 billion over the next decade is a credible estimate. This aligns with the fiscal capacity provided by the planned increase in defence spending to 2.5% of GDP, which equates to an additional ~£20 billion per year by the end of the decade (source: Institute for Fiscal Studies).
The project is part of a wider Western trend. The US Army is aiming to increase its 155mm shell production to 100,000 per month (source: US Department of Defense). The EU has allocated €500 million under ASAP to ramp up production to over 1 million shells per year (source: European Parliament). The UK's initiative is therefore not in isolation but is a necessary national component of a collective allied effort to re-arm.
Scenarios (3) with probabilities
Scenario 1: State-Led Strategic Enterprise (Probability: 40%)
In this scenario, the UK government designates the project as a top national security priority, directly funding and overseeing the development of one or two key sites. A Government-Owned, Contractor-Operated (GOCO) model would likely be used, with the MoD retaining ownership of the assets while a prime contractor (likely BAE Systems or a new consortium) runs the facility. This model prioritizes speed of delivery and sovereign control over commercial efficiency. It would be driven by a sustained sense of urgency from the geopolitical situation. The high cost would be justified as non-discretionary national security spending.
Scenario 2: Public-Private Partnership (PPP) & Foreign Direct Investment (Probability: 50%)
This is the most likely scenario, aligning with the UK’s established approach to major infrastructure. The MoD would act as an anchor customer, providing long-term, high-volume offtake agreements. This guaranteed demand signal would be used to attract private capital from infrastructure funds and major international defence firms to finance, build, and operate the new facilities. This de-risks the project for the Treasury and brings in external expertise and technology. However, complex commercial negotiations could extend the timeline, and debates over foreign ownership of critical national infrastructure would be prominent.
Scenario 3: Fragmented & Delayed Modernisation (Probability: 10%)
In this scenario, the project loses momentum. Fiscal pressures from other government departments, a prolonged economic downturn, or a perceived (but unlikely) de-escalation of international tensions could lead the Treasury to scale back the ambition. The ‘multibillion-pound’ plan is reduced to a series of smaller, incremental upgrades to existing facilities. The development of new large-scale sites is postponed indefinitely. This would leave the UK’s structural deficit in munitions production largely unresolved, creating significant strategic risk.
Timelines
Phase 1: Feasibility & Planning (12-24 months): Final site selection, detailed environmental and engineering surveys, development of the commercial model, and securing initial funding approvals from Treasury. This phase is critical and will determine the project's ultimate structure.
Phase 2: Procurement & Design (18-24 months): Running the competition to select a prime contractor or PPP consortium. Finalizing facility design and achieving planning consent, which could be a significant hurdle.
Phase 3: Construction & Commissioning (3-5 years): The physical build of the facilities. This is a complex process involving specialized construction for handling explosive materials. Recruitment and training of the workforce would run in parallel.
Phase 4: Operational Capability (6-10 years from today): Initial Operational Capability (IOC) for the first production lines could be achieved within 6 years (c. 2031). Full Operational Capability (FOC) across multiple production lines and precursor manufacturing would likely take up to a decade (c. 2035).
Quantified Ranges
Capital Investment: £2 billion – £5 billion over 10 years. This range covers the construction of 1-3 new major facilities, including specialized equipment, site remediation, and supporting infrastructure.
Direct Employment: 750 – 2,000 high-skilled manufacturing and engineering jobs. This is based on the scale of similar industrial facilities. The indirect employment multiplier in the supply chain and local services could be 2-3x this number.
Production Output: The strategic goal would be to increase UK sovereign production capacity for key munitions (e.g., 155mm shells) by an order of magnitude, from tens of thousands to several hundred thousand rounds per year. This would be sufficient to replenish UK stockpiles, support sustained operations, and potentially export to allies.
Risks & Mitigations
Fiscal & Political Risk: A change in government or shifting fiscal priorities could threaten the long-term funding commitment. Mitigation: Secure cross-party support by framing the project as a foundational element of national security. Establish a multi-year funding settlement through a formal Defence and Security Industrial Strategy.
Planning & Environmental Risk: Local opposition based on safety or environmental concerns could cause significant delays. Mitigation: Designate the chosen sites as Critical National Infrastructure to streamline the planning process. Conduct transparent environmental impact assessments and community engagement, emphasizing the national security imperative and local economic benefits (jobs, investment).
Skills Gap Risk: The UK has a shortage of specialized chemical engineers, explosive technicians, and advanced manufacturing skills. Mitigation: Launch a national skills initiative in partnership with industry and academia. Create dedicated apprenticeship and graduate programs focused on munitions manufacturing, potentially co-located with the new facilities.
Supply Chain & Raw Material Risk: The project could still be vulnerable to bottlenecks in the global supply of certain raw materials or sub-components. Mitigation: The industrial strategy must include mapping and securing critical mineral and chemical supply chains, including investment in domestic production of key precursors like nitrocellulose to reduce foreign dependency.
Sector/Region Impacts
Defence Sector: This represents a generational opportunity for the UK defence industry, reversing decades of decline in onshore manufacturing capacity. It will create a long-term revenue stream for the chosen prime contractors and stimulate innovation and investment across the supply chain.
Chemical & Process Industries: The initiative will revitalize a segment of the UK's chemical industry by creating new, stable demand for propellants and explosives. This could anchor industrial clusters in regions like Teesside and Grangemouth.
Regional Development: The project is a powerful vehicle for the 'levelling up' agenda. Directing this scale of investment and job creation into former industrial heartlands would provide a significant, long-term economic boost, creating high-value jobs and fostering new supply chains.
Recommendations & Outlook
For Government (MoD, Treasury, DBT): Urgently establish a dedicated, cross-departmental task force to drive the program. A clear, detailed commercial and funding framework must be published within 12 months to provide industry and investors with the certainty needed to commit resources. The government should provide the anchor commitment through a multi-decade procurement plan for the munitions that will be produced.
For Industry (Defence, Engineering, Chemicals): Proactively form consortia to offer integrated solutions covering construction, technology transfer, and operations. Engage immediately with the MoD to help shape the requirements. Potential operators should begin preliminary feasibility and skills-mapping studies for the identified regions.
For Investors (Infrastructure Funds, PE): The primary opportunity will emerge once the government clarifies its preferred commercial model. (Scenario-based assumption): A PPP structure will offer long-term, inflation-linked revenue streams backed by a government client, which is attractive for infrastructure investors. Due diligence should focus on the robustness of the MoD's offtake guarantees and the allocation of construction and operational risk.
Outlook: The strategic logic behind this initiative is overwhelming and durable. The era of assuming low-risk, low-volume military requirements is over. (Scenario-based assumption): The project will proceed, most likely via the PPP model (Scenario 2), as it balances strategic need with fiscal prudence. While the timelines are long, this announcement represents a pivotal moment—the first concrete step in rebuilding the UK's industrial capacity for national defence, with profound implications for the country's security, industrial base, and regional economies for decades to come.