Assessing European defence spending

The context

Europe is undergoing its most significant rearmament drive in a generation. Facing the largest land war in Europe since 1945 in Ukraine, sustained security threats from Russia and the election of Donald Trump — long-critical of European “freeloading” on defence — NATO members have been pushed to consider unprecedented new spending targets.

For clients seeking to capitalise on this rapid expansion and position themselves early, the critical question was not simply where the spending would be, but whether it could realistically happen — and which countries, markets, and industrial sectors would emerge as genuine winners.

Our foresight

Beginning in January 2025, we drew on our expertise as former UK Ministry of Defence planners to assess in depth the potential spending plans of the four largest and most strategically significant NATO members: the UK, Germany, France, and Poland. We analysed:

• National politics and fiscal constraints.
• Realistic rearmament plans and timelines.
• Cross-cutting limiting factors such as industrial capacity and supply chain resilience.

This approach allowed us to be ahead of the headlines, providing clients with a grounded view of both the scale of the opportunity and the practical constraints shaping it, well in advance of formal announcements at the June 2025 NATO Summit.

What we projected

Europe yielding to US pressure

In July 2024, four months before the US election, we called that accelerated US pressure under a Trump Presidency would finally push European members to commit publicly to major defence increases. However, even if only half the targets were met, we anticipated an additional €1.5 trillion in defence spending over the next decade.

Evolution of a multi-track NATO

National divergences in starting points and capacity would create a “multi-track” NATO, where some states surge ahead while others lag, reshaping the distribution of industrial and strategic opportunities.

Identifying Europe’s critical capability gaps

Our scenario work pinpointed the most pressing deficits across land systems, high-end intelligence and command capabilities, and ammunition and stores — enabling clients to align with areas of greatest need.

Industrial capacity as a persistent constraint

Limited European production would remain a bottleneck, making Turkey, South Korea, Japan, and the US key short-term beneficiaries.

National-level decision-making as the true driver

Defence remains a national competence, making it essential to track each country’s political will, fiscal health, and industrial delivery capacity.

The result

Macro and fixed income clients gained an evidence-based, directional view of European defence spending trends, informing models for inflation and bond issuance.

Equity and company investors received mapping of industrial segments and national markets most likely to see sustained growth.

Corporate clients validated their strategic positioning for procurement in high-growth European defence markets.

Why it matters

The reality of defence spending is far more complex than public announcements suggest. By combining our expert networks with proprietary assessment methods — built on decades of real-world defence planning experience — we gave clients clarity on the political realities, fiscal limits, and operational bottlenecks that determine how European defence ambitions will translate into actual contracts, capability, and industrial demand.