The sector continues to see resilient demand supported by structural tailwinds.
Logistics, last-mile delivery, and the need to safeguard critical infrastructure are driving sustained occupier requirements. Availability of space, however, continues to be an issue with project starts, awards and approvals all currently subdued, while the war in Iran is impacting manufacturing supply chains and costs.
Instability and uncertainty
Growth and investment across the sector are not materialising as hoped, going into 2026. This is largely due to uncertainty created by an ever-changing tariff regime, as well as the ongoing wars in Ukraine and Iran.
Government support will be essential in the coming months, with the launch of the £50m Scotland Defence Growth Deal in March 2026 a positive step that should build on last year’s Defence Industrial Strategy by boosting innovation and skills infrastructure.
Meanwhile, the government’s Steel Strategy aims to ensure the continued viability of domestic steel production by incentivising a switch to domestic manufacturers. This of course means a cost pressure for manufacturers using imported steel, especially for specialist grades not produced in sufficient UK volumes, with an out-of-quota tariff rate of 50% from 1 July 2026.
The seasonally adjusted S&P Global UK manufacturing PMI posted 51.0 in March 2026, above the neutral 50.0 mark separating growth from contraction, but down for the first time in six months from 51.7 in February.
Reasons for this include the scaling back of production volumes linked to rising uncertainty and lower levels of confidence among manufacturers and their clients about the year ahead amid war in Iran. Delivery times have lengthened to the greatest extent since mid-2022.
The data shows new order inflows held up better than production, which would suggest demand remains, but will likely soon be tempered by high energy prices and economic uncertainty if there is no resolution to the war.
Highlighting strong demand are the latest aircraft orders figures, which hit a three-year high in February 2026 – up by over 80% year-on-year. Vehicle production, on the other hand, fell in February by -17.2%, with 68,061 units leaving factories, according to the latest figures published by the Society of Motor Manufacturers and Traders (SMMT).
Make UK warns that the conflict could be the last straw for UK manufacturers already facing a “pile up” of commercial burdens such as employment costs and business rates – urging the government to move quickly to secure energy prices, and to progress the Rosebank and Jackdaw developments.
Planning ahead
Outcomes from the recent National Planning Policy Framework (NPPF) consultation will be of interest, as the revised framework recognises the role development can play in driving economic growth.
Local authorities will also be required to identify strategic sites for local and inward investment, including suitable locations for gigafactories, freight hubs, and logistics facilities.
As Melanie Leech, chief executive of the British Property Federation, states:
There is a clear and urgent need to deliver more homes across the UK but national planning policy should give equal weighting to employment uses, particularly industrial and logistics which underpins supply chains across the country, supports a wide range of employment and is vital for the delivery of the government’s Industrial Strategy.
The government’s latest statistics on planning decisions highlight the need for effective reforms and resourcing, with the number of commercial decisions both made and granted down 9% each from the same quarter a year earlier.
It is vital, therefore, that thorough due diligence for any project is prepared ahead of planning to ensure all risks are appropriately mitigated.
Driving the sector forward
The sector faces ongoing recruitment challenges, with Logistics UK reporting the industry is at a "crossroads" due to a falling driver population.
UK HGV driver vacancies last quarter remain in high demand, driven by an aging workforce and structural shortages. This is particularly acute for Class 1 and specialised tanker drivers. Meanwhile, strong demand persists for experienced drivers across key logistics hubs such as London, with hourly rates for Class 2 often exceeding £22 per hour plus benefits.
Looking for impetus on electric vans and trucks uptake, the government announced the Zero Emissions Truck and Van grant and the Depot Charging Scheme in March 2026. As part of a £1bn investment, companies can now cover up to 40% of the cost for heavy vehicles – saving as much as £81,000 per truck – while securing up to £5,000 off new electric vans.
For HGVs, adoption is only just beginning – just 1.4% of the market in 2025 – reflecting the sector’s diverse operating requirements, high upfront costs and the scale of charging and refuelling infrastructure still required.
Funding is a welcome first step, but installation, grid capacity and site planning will need to be carefully managed if logistics companies are to take full advantage of this opportunity.
