Defence Industries

The importance of EU defence industries

The defence industry is a major industrial sector. The sector is highly innovative and centred on high-end engineering and technologies. Its cutting-edge research has created important knock-on effects in other sectors such as electronics, space, and civil aviation. It is a key sector for Europe’s ongoing development as a world leader in manufacturing and innovation. The sector:

• Directly employs about 500,000 people
• Generates up to 1,200,000 indirect jobs (2014)
• Had a turnover of EUR 97,3 billion in 2014, making European defence a major contributor to EU growth
• Invests heavily in innovation. The EU defence equipment market is technology and research-intensive (electronics, IT, transport, biotechnology, and nanotechnology) with many important spin-offs in civil sectors such as satellite navigation.

The defence sector involves more than 1,350 small and medium-sized enterprises (SMEs) who are critically important to the supply chain. These SMEs are mostly concentrated in six EU countries (France, Germany, Italy, Spain, Sweden, and the United Kingdom). However, companies producing ancillary equipment and systems are found all over Europe.

Challenges faced by the sector

• Fragmented markets create red tape, hamper innovation, and lead to the duplication of defence programmes and research. This undermines Europe’s global competitiveness and the effectiveness of the EU’s Common Security and Defence Policy (CSDP)
• Reduced defence budgets and escalating development costs make it too expensive for any single European country to maintain a comprehensive national defence industrial base;
• The defence sector is vulnerable to a shortage of skilled labour
• Many defence companies are SMEs that require particular support in order to promote competitiveness
• The sector is highly regulated at national level. Until recently, Europe's defence-related industries (primarily the defence aspects of sectors, such as aeronautics, space, electronics, land systems, and shipbuilding) have operated outside the internal market.

The role of the Commission

The European Commission is actively promoting the competitiveness of the European defence industry.

The key objective of the European Commission's defence industrial policy is to develop a competitive and innovative European Defence Technological and Industrial Base (EDTIB). An EDTIB is important for an effective EU Common Security and Defence Policy (CSDP). This policy is designed to provide the EU with the capacity for autonomous action when responding to international crises, without prejudice to actions by NATO.

A competitive EDTIB is also required to provide Europe with the ability to affordably cooperate internationally in the development and production of defence equipment.

Read more on the role of the Commission