After decades during which European military budgets were limited to finance another commitments, President Donald Trump's tough approach to Ukraine and calling on allies to take on a greater safety burden forced the leaders of the region to act. Governments promise to unlock hundreds of billions of euros to mobilise an industrial base and bridge gaps in their arsenals.
Defence companies in Europe benefited from higher spending after the Russian full-scale invasion of Ukraine 3 years ago, and fresh government procurement increased transportation delays to evidence levels.
Trump's return to the White home accelerated Europe's military efforts and with them the prospects of the industry. Company valuations increased this week to evidence levels, and the shares of any groups have increased by more than 40% since the beginning of the year.
— Geopolitical tensions, including Russia's invasion of Ukraine [...] fuel a fresh global super-defensive cycle," said Lorenana Muharremi, an analyst at Morningstar.
The possible end of U.S. military support for Europe has raised questions about the gaps in the capacity of this continent — and that, which companies can benefit from the urgent request to fill them. The war in Ukraine revealed weaknesses in areas specified as intelligence and observation, anti-aircraft and rocket protection systems, heavy-transport transport aircraft, and refueling in the air. This week, the United States struck the Ukrainian ability to attack Russian forces, interrupting the exchange of intelligence with Kiev.
Estimates of the Stockholm global Institute for Peace investigation show that the United States was liable for 55% of defence equipment imports into Europe between 2019 and 2023 — compared with 35% in the erstwhile 5 years.
According to Guntram Wolff, a elder Brussels analyst think tank Bruegel, the reorientation of American policy towards Europe is “foundable enough” and “the state The biggest change since planet War II‘.
— This can be compared to the end of the Cold War," he said, but on the negative side, due to the fact that Western Europe has been under US umbrella under strategical U.S. leadership for the past 80 years.
Industry officials said they were ready to increase investmentbut they stress that they request governments to meet their promises of spending in the form of long-term contracts.
Europe has "necessary technology to produce a full spectrum of defence equipmentThis week, Patrice Caine, CEO of Thales, a French defence electronics company, said. However, it was crucial that these declarations were “supported by additional contracts. [...] If there are orders, we will be ready."
US arms companies can besides benefit from increased spending on European governments, Unless these countries deliberately exclude American equipment. respective European countries bought the Lockheed-built Martin F-35, the world's most advanced fighter.
Land vehicles and ammunition
Europe's production capacity for ammunition and armoured vehicles is severely limited, which may besides constitute an chance for American manufacturers specified as General Dynamics, to proceed to supply equipment.
However, the direct beneficiaries of expenditure growth in Europe are expected to be a tiny group of national champions in the field of defence, specified as German Rheinmetall and British BAE Systemswhich have benefited from orders for land vehicles, ammunition and ammunition. KNDS, an alliance of French Nexter and German Krauss-Maffei Wegmann, is another likely winner.
Rheinmetall, BAE, Nexter and the Finnish-Norwegian company Nammo will benefit from larger investments in ammunition. Suppliers of explosives and propellants specified as British Chemring and French Eurenco will besides gain.
Anti-aircraft and rocket defence systems
More resources are besides expected to be allocated to air and rocket defence systems. Ukraine has so far benefited from American Patriot System, Washington's most advanced air defence weapon, which respective allies besides use. It consists of a radar strategy and mobile launchers that can launch interceptor missiles towards incoming missiles or aircraft.
Analysts say that alternatively Europe could send Kiev more SAMP-T missiles. This system, produced by Eurosam, a joint venture of the pan-European rocket tycoon MBDA and Thales, is besides utilized by Italian and French armed forces.
Thales signed a £1.6 billion contract on Sunday (about PLN 80 billion) with the UK government for construction more LMMs utilized by Ukraine's armed forces. Swedish Saab, who manufactures NLAW anti-tank missiles, can besides score more orders.
Interview and observation
Another crucial area in which Europe must increase investment is interview, reflection and diagnosis (ISR). Douglas Barrie, a elder military aviation specialist at the global Institute for strategical Studies, said that the war in Ukraine showed the importance of the ISR and America's key function in providing them. Europe is counting on only 3 types of "big-wing" signal intelligence aircraft, including the Boeing RC-135 Rivet Joint utilized by Britain.
Marijan Murat/dpa / PAPGerman Chancellor Olaf Scholz passes alongside the Spexer 200 3D MKIII radar with Thomas Mueller, president of Hensoldt AG, while visiting the plant. Ulm, 16 January 2023.
According to analysts, 1 of the possible beneficiaries is the Munich company Hensoldt, which Working on an air surveillance strategy called Pegasus for the German Armed Forces. Swedish Saab besides has the capacity for early informing and control systems.
Space and satellite communications
Satellite communication and integration of data on the battlefield is key areas where Europe relied on US aid. “Digital integration, data management, satellite intelligence, and then connecting all of this with ground troops is simply a large gap we request to invest in,” said Wolff.
Eutelsat, a French satellite operator and owner of OneWeb, said this week that he is having talks with European governments about providing additional satellite communications in Ukraine. The company is in a good position if Starlink Elona Muska, who played key function in helping Kiev improve communication on the battlefieldHe would retreat his services. Eutelsat's stock price has increased by over 500 percent since Friday's closing.
Artificial intelligence and autonomous systems
It is expected that European governments will allocate crucial amounts to fresh growth areas, specified as artificial intelligence, cybersecurity and autonomy, which are to play a immense function in future war activities.
This change will benefit any existing players — Thales is simply a leader in cybersecurityWhile Italian Leonardo has many years of experience in sensors and radar. Leonardo besides talks about partnership with Turkish maker of Baykar drones to increase production capacity on the continent.
EPA/LUDOVIC MARIN / POOL / PAPFrench president Emmanuel Macron participates in the cockpit presentation with Thales CEO Patrice Caine during a visit to the global Paris Aviation Salon. Le Bourget, 19 June 2023.
However, fresh participants are besides expected to benefit, as is the developing Ukrainian drone industry.
Robert Stallard, an analyst at Vertical investigation Partners, said that Europe has “the chance to do something differently [...] by introducing more commercial technology companies for the defence sector‘.
German start-up Helsing dealing with artificial intelligence in the defence sector, seen as European consequence to American company Palantir Technologies Peter Thiel, announced last year that he would be working on producing drones to exploit the increasing request for autonomous weapons.
The company has committed to delivery of 6000 HX-2 assault drones to Ukraine. These drones are electrically driven and scope up to 100 km. Advanced on-board artificial intelligence provides full opposition to electronic attacks.
© The Financial Times Limited 2025. All rights reserved. No distribution, copying or modification shall be permitted. Onet bears sole work for translation, Financial Times Limited bears no work for its accuracy or quality.
