An analysis has revealed that UK Prime Minister Keir Starmer's decision to fund a pay rise for the military by slashing infrastructure spending will result in the loss of approximately 10,000 jobs. The findings, published by a leading economic think tank, underscore the trade-offs inherent in the government's fiscal strategy as it seeks to bolster defence capabilities amid ongoing global tensions.
Job Losses Across Key Sectors
The study, conducted by the Institute for Fiscal Studies (IFS), indicates that the proposed cuts to infrastructure projects—including roads, railways, and broadband—will disproportionately affect construction and engineering sectors. According to the IFS, for every £1 billion diverted from infrastructure, around 7,500 direct and indirect jobs are lost. With an estimated £1.3 billion reallocated to defence pay, the total job losses could exceed 10,000.
"The decision to prioritise defence spending over infrastructure investment will have immediate and tangible consequences for workers across the country," said IFS director Paul Johnson. "While the government's commitment to national security is understandable, the economic fallout cannot be ignored."
Defence Pay Rise Details
Starmer announced last week that the government would provide a 5% pay increase for all armed forces personnel, backdated to April 2026. The move, costing an estimated £1.3 billion, is intended to address recruitment and retention challenges within the UK military. However, the Treasury confirmed that the funding would come from existing departmental budgets, with the Ministry of Defence absorbing some costs and the remainder sourced from cuts to the Department for Transport's capital expenditure.
Transport Secretary Louise Haigh defended the decision, stating that "the safety of our nation must come first." She added that the government would work with affected industries to mitigate job losses through retraining programmes and phased project timelines.
Economic Impact and Regional Disparities
The IFS analysis highlights that the job losses will be concentrated in regions that rely heavily on infrastructure spending, such as the North East, Wales, and Scotland. These areas already face higher-than-average unemployment rates, raising concerns about deepening regional inequalities. The think tank estimates that the cuts could reduce GDP growth by 0.1% over the next two years.
Shadow Chancellor Rachel Reeves criticised the government's approach, calling it "a short-sighted raid on the future of our economy." She argued that investing in infrastructure is essential for long-term productivity and that the defence pay rise should have been funded through other means, such as a windfall tax on defence contractors.
Political Reactions
The announcement has sparked a fierce political debate. Conservative Party leader Rishi Sunak accused Starmer of "breaking his promise to prioritise infrastructure" and called for a rethink. Meanwhile, defence unions welcomed the pay rise but expressed concern over the funding mechanism. "Our servicemen and women deserve fair compensation, but not at the expense of vital public works," said a spokesperson for the Royal British Legion.
Starmer defended the decision in Parliament, stating that "a strong defence is the foundation of a secure nation, and we must ensure our armed forces are properly rewarded." He pledged that the government would seek alternative funding sources for future infrastructure projects.
Looking Ahead
The IFS warns that further cuts may be necessary if the government proceeds with planned increases in defence spending over the next decade. The UK has committed to raising defence expenditure to 2.5% of GDP by 2030, a target that could require additional reallocations from other departments. The analysis calls for a comprehensive review of fiscal priorities to avoid repeated shocks to the economy and employment.
As the debate continues, affected workers and communities await clarity on the timeline and scale of job losses. The government has announced a task force to oversee the transition, but critics argue that more concrete support is needed.
