“If you’re going to go to 3%, that would be roughly €750 billion. If you’re going to go to 3.5%, you’re talking €850 to €900 billion,” Heelan said.
A large portion of this increase is expected to go towards procurement, not just salaries or pensions. Currently, about 20% of defence budgets go to equipment and systems, but that percentage is rising. Heelan pointed to Germany as a telling example.
In 2021, Germany spent around €60 billion on defence, with only €8–9 billion—roughly 15%—allocated to procurement. But by 2030–2032, if Germany spends 3% of its GDP on defence, that figure could jump to €130 billion, with €60 billion going to procurement alone.This sharp rise in both total defence budgets and the proportion being spent on new equipment is having a compounding effect on the defence sector. “You can see why the defence stocks in Europe, the industry in Europe has done what it has done,” Heelan noted.
Not only is there more money going into defence overall, but a growing slice of that is earmarked for capital expenditure, directly benefiting manufacturers and suppliers.
European defence companies that saw modest growth of around 4–5% between 2019 and 2021 are now on track to post much stronger numbers. “They will be growing low to mid-teens in the next four years,” Heelan said. What’s more, he expects another leg of growth between 2027 and 2030 as current orders start hitting company financials.
With defence spending on the rise and procurement gaining greater weight, the European military-industrial complex could be heading into a supercycle—one that companies and investors alike are watching closely.
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First Published: May 28, 2025 5:21 PM IS
