This paper argues that the current upheaval in the British Defence industry reflects a qualitative restructuring of historical importance. Throughout the “Cold War” the British defence industry was characterised by remarkable continuity in its industrial, corporate, and geographical structures. These institutional parameters have come to an end. The smaller “Post Cold War” defence industry which is emerging has new social and geographical implications. These changes are such that the spontaneous adjustment of the UK defence industry to changes in market conditions is unlikely to lead to a substantial reallocation of resources to non‐defence uses. If the potential for a “Peace Dividend” is to be realised a new approach to policy is called for.