European Union

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Monday 9 February

Source : © European Union, 2026 - EP

Monday 9 February

Source : © European Union, 2026 - EP

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Written by Sebastian Clapp

Facts and figures

The EU’s defence industry is at a pivotal moment, shaped by Russia’s full-scale invasion of Ukraine, the United States’ shifting priorities, and a renewed drive for strategic autonomy. After years of underinvestment and persistent fragmentation, the EU is now seeking to rebuild military capability and strengthen its defence industrial base. The European defence industry comprises a number of large prime contractors, mid-caps and a large number of small and medium-sized enterprises (SMEs). According to Aerospace, Security and Defence Industries Association of Europe (ASD) data, and the author’s calculations for the EU-27, the EU-based defence industry’s turnover is estimated at around €148 billion in 2024, an increase of more than 60 % since 2021 in nominal terms. Exports amounted to roughly €48 billion in 2024 and direct employment in the EU defence industry amounted to around 500 000 people.

Table 1 – Top EU defence companies by revenue

CompanyCountryRevenue*Global rankingThalesFrance15 900#10LeonardoItaly13 822#13AirbusEuropean12 705#14RheinmetallGerman8 245#18SaabSweden5 542#26MBDAEuropean5 305#27SafranFrance5 198#29Naval GroupFrance4 716#33

Source: DefenseNews, 2024. *Revenue from defence in US$ million (2024).

Table 2 – EU defence industry revenue, 2021-2024

Source: ASD data, 2025 and author’s calculations.

The EU’s defence industry remains largely concentrated in France, Germany, Italy, Spain and Sweden. However, a report shows that prime producers of the 46 most critical defence items are located across 23 Member States. Thales of France ranked as the largest defence company in the EU by defence revenue in 2024, followed by Italy’s Leonardo. That year, 20 companies headquartered in the EU featured among the world’s top 100 defence firms, including five based in France and four in Germany, together generating defence revenues of approximately US$112 billion, or about €104 billion. By contrast, 48 of the top 100 defence companies were based in the United States, accounting for roughly US$334 billion in defence revenue. Lockheed Martin alone, the leading global defence firm, reported defence revenues of US$68.39 billion. Five of the top 100 were based in China, together accounting for US$355 billion in revenue. The ownership structure of Europe’s leading defence firms underscores the strategic character of the sector.
In many instances, national authorities maintain blocking or controlling shares, which helps safeguard alignment with national priorities and allows for direct public oversight. Across continental Europe, ownership is commonly concentrated either within the state or among family-controlled enterprises. Prominent examples include Dassault (almost 70 % of shares held by the Dassault family’s Groupe Industriel Marcel Dassault), Naval Group (over 60 % of shares are held by the French state), Fincantieri (70 % of shares held by the state-owned Italian sovereign wealth fund, CDP Equity S.p.A.), and Liebherr Group (entirely owned by the Liebherr family). State participation can narrow the scope for cross-border cooperation and industrial consolidation. While mergers between defence firms may deliver economic benefits through economies of scale, they are often treated as strategically sensitive due to their implications for national security and sovereignty. Family-owned firms similarly pursue nationally anchored corporate strategies, reducing their openness to deeper EU-level integration. Golden power rules and the veto capacity of dominant family shareholders further reinforce this structural rigidity. Researchers found that the combined effect is a European defence industrial base that remains fragmented and less competitive than more consolidated markets.

What does the European defence industry produce?

The European defence industry produces a broad range of military equipment and technologies and therefore provides an extensive industrial offering. Its production spans: military aeronautics, including combat, transport and mission aircraft, and helicopters; land capabilities, such as main battle tanks, armoured vehicles across multiple classes, logistics and tactical transport assets, artillery and ammunition of different calibres, alongside individual combat equipment; naval platforms from submarines to surface combatants; space-related defence capabilities; missile systems at both tactical and strategic levels; and defence-specific electronics, information and communication technologies, cyber capabilities and autonomous systems – notably drones, which have experienced a particular boom in production. Despite this breadth, the EU industry does not currently provide domestic solutions in several critical segments, including medium altitude long-endurance unmanned aerial vehicles, tactical ballistic missiles and long-range artillery rockets. These gaps reflect long-term underinvestment and sustained dependence on the United States security guarantee.

Following Russia’s invasion of Ukraine, the rapid availability of military equipment became a key priority for EU governments and armed forces. Firms based outside Europe – benefiting either from larger domestic markets as in the United States or from higher baseline levels of defence readiness as in South Korea – were better positioned to maintain higher production capacity and to deliver or pledge substantial quantities of equipment at speed. By contrast, many European manufacturers were limited by long periods of industrial contraction and underinvestment. This context has evolved markedly since the onset of Russia’s full-scale invasion. EU ammunition production capacity, for example, rose from around 300 000 rounds per year in 2022 to an estimated 2 million by the end of 2025, reflecting a pace of industrial expansion that, according to the Financial Times, exceeds peacetime growth rates by a factor of three.

EU and Member States’ support for the defence industry

EU Member States’ defence expenditure has risen sharply since 2021, reflecting a sustained shift towards higher investment in defence. Defence spending reached an estimated €381 billion in 2025, representing a rise of almost 63 % compared to 2020. Expenditure grew from 1.6 % of GDP in 2023 to 1.9 % in 2024 and is expected to reach approximately 2.1 % in 2025. Growth has been driven primarily by investment, which approached €130 billion in 2025. Investment accounted for 31 % of total defence expenditure in 2024, with equipment procurement dominating and exceeding €88 billion. Defence research and development spending also expanded significantly, reaching €13 billion in 2024 and a projected €17 billion in 2025. The EU has introduced several measures to complement and amplify national efforts. These include financial support instruments such as the SAFE loan facility, budgetary flexibility via the national escape clause, and cooperation through the European Peace Facility. In parallel, EU budget instruments such as the European Defence Fund, military mobility funding, the Act in Support of Ammunition Production (ASAP), the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA) and the European defence industry programme (EDIP) aim to reduce fragmentation and strengthen the competitiveness of Europe’s defence industrial base.

European Parliament position

Parliament has consistently called for an increase in defence spending and for boosting the EU defence industry. Members welcome rising national defence spending but urge deeper European cooperation to prevent market fragmentation and call for expanded industrial output and greater interoperability.

Read this ‘at a glance’ note on ‘European defence industry‘ in the Think Tank pages of the European Parliament.

Negotiators from the US and Iran held indirect talks in Oman on Friday. Both sides lauded the start of negotiations, but at the same time upped the pressure: US President Donald Trump threatened to impose additional punitive tariffs on countries that do trade with Iran, while Iranian Foreign Minister Abbas Araghchi warned that attacks on his country would be met with attacks on US bases in the region.

Japan's national conservative ruling party has secured a resounding election victory: under the leadership of Prime Minister Sanae Takaichi, who has only been in office since October, the Liberal Democratic Party (LDP) has won more than two-thirds of the seats in the parliamentary election - the first time a single party has achieved such a majority in Japan. Takaichi has promised to upgrade Japan's military to create a counterweight to China in the region.