Europe Defense Market (2026-2036)

The Europe Defense Market comprises spending by European governments on defense equipment procurement, defense research and development, and the maintenance, repair, overhaul, and upgrade of military equipment. It covers land systems and ammunition, combat and transport aircraft, helicopters and uncrewed aircraft, naval vessels and submarines, air and missile defense, command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) and defense electronics, and space and cyber capabilities. Personnel, pensions, and general operating expenditures are excluded. The market covers the 27 EU member states, the United Kingdom, Norway, Switzerland, Türkiye, Ukraine, and other non-EU European countries, excluding Russia and Belarus. The ecosystem spans national defense ministries and procurement agencies, the European Commission, the European Defence Agency, NATO, prime contractors, subsystem and component suppliers, and ammunition and energetics producers.

The European Defence Agency reported that EU member states' defense spending reached EUR 418 billion in 2025, up 20% and 2.2% of GDP, with a cumulative 47% rise between 2022 and 2025, and projected EUR 454 billion in 2026, 2.4% of GDP, with spending potentially reaching EUR 547 billion by 2029. Defense equipment procurement reached EUR 115 billion in 2025, after rising 39% to EUR 88 billion in 2024, and defense R&D is projected to rise from EUR 17 billion in 2025 to EUR 20 billion in 2026.

Policy frameworks are reinforcing the trend. At the June 2025 Hague summit, NATO allies agreed to spend 5% of GDP on defense and security by 2035, comprising 3.5% for core defense and up to 1.5% for wider security-related spending; the EDA estimates that meeting the 3.5% target would require EU member states to spend more than EUR 630 billion a year. In March 2025, the European Commission presented the ReArm Europe Plan/Readiness 2030, aiming to mobilize more than EUR 800 billion in defense spending, including the national escape clause of the Stability and Growth Pact and the EUR 150 billion Security Action for Europe (SAFE) loan instrument, which was fully subscribed by 19 member states and permits joint procurement with Ukraine and EEA-EFTA countries.

Europe's industrial base is expanding, but dependence on external suppliers remains high. SIPRI reported in March 2026 that arms imports by European states more than tripled between 2016-20 and 2021-25, making Europe the largest importing region with 33% of global arms imports, and that the 29 European NATO members' imports grew 143%, with the U.S. supplying 58% of them. Ukraine received 9.7% of all global arms transfers in 2021-25, and Poland and the U.K. were the next-largest European importers. At the same time, France's arms exports rose 21%, and Ukraine's own military spending rose 20% to USD 84.1 billion in 2025, equivalent to 40% of its GDP.

The Nordic countries are expected to register strong growth, driven by their proximity to Russia and the accession of Finland and Sweden to NATO.

Norway (24th globally), Sweden (25th), Denmark (27th), and Finland (36th) all ranked among the world's top 40 military spenders in 2025, according to SIPRI.

Finland received a EUR 1 billion SAFE allocation and Denmark EUR 46.7 million, while both finance most procurement nationally.

Denmark has taken delivery of F-35A fighters, and the Nordic countries are major buyers of air defense, artillery, ammunition, and naval systems, as well as home to leading suppliers such as Saab, Kongsberg, and Nammo.

The Baltic states are among Europe's most committed defense spenders relative to their economies.

Lithuania received a EUR 6.37 billion SAFE allocation and was among the first five countries to sign its loan agreement, Latvia received EUR 5.68 billion, and Estonia received EUR 2.66 billion and approved a defense development plan of more than EUR 10 billion for 2026-2029, prioritizing air defense, deep-strike capabilities, and ammunition stocks.

Their procurement focuses on air defense, artillery, long-range fires, and border protection.

Türkiye ranked as the 18th-largest military spender globally in 2025, according to SIPRI, and has a large and increasingly export-oriented domestic defense industry producing drones, armored vehicles, naval vessels, and missiles.

As a NATO member outside the EU, Türkiye is not eligible for SAFE loans but is a significant market for defense equipment and a growing supplier to other European and international customers.

Ukraine is a central and unique market within European defense.

Its military spending rose 20% to USD 84.1 billion in 2025, equivalent to 40% of GDP, ranking it seventh globally, and it received 9.7% of all global arms transfers in 2021-25, the largest share of any country, according to SIPRI.

Ukraine is eligible to participate in joint procurement under SAFE, and 13 of the 19 SAFE applicants indicated they foresee involving and supporting Ukraine.

Its rapidly growing domestic industry, particularly in drones, is increasingly integrated with European suppliers through joint production.

The rest of Europe includes Slovenia, Luxembourg, Malta, Ireland, and non-EU countries in the Western Balkans and elsewhere, which are smaller defense markets but are modernizing their armed forces through national budgets, NATO programs, and, for EU members, access to EU instruments.

Collectively, these countries represent a growing market for air defense, armored vehicles, and communications equipment.