CEC Opinion Piece: Europe’s Defence Industrial Future - SMEs, Cooperation, and Strategic Integration in a Fragmented World
- Nicholas Cobb
- Jun 4
- 4 min read
By Nicholas Cobb - All views are that of the author.
With less than two weeks to go until Eurosatory, the world’s largest defence and security exhibition and a key gathering point for Europe’s defence community, this moment comes amid heightened global instability and sustained geopolitical pressure. At the same time, cooperation between Europe’s defence industrial base and military end users across NATO has arguably never been stronger, creating a rare window to accelerate alignment between capability development, procurement, and operational need.
Europe’s security environment is undergoing a structural transformation. The return of high-intensity conflict on the continent, sustained geopolitical rivalry between major powers, and increasing pressure on global supply chains have fundamentally altered the assumptions underpinning European defence policy.
Defence is no longer episodic or regional in character. It is systemic.
In response, European defence expenditure has risen sharply, reaching approximately €343 billion in 2024, with forecasts approaching €380+ billion annually by 2025. However, financial mobilisation alone does not resolve the deeper structural challenge: Europe’s fragmented industrial base.
The European Defence Industrial Base: Scale Without Full Integration
Europe possesses a substantial and technologically advanced defence ecosystem, but it remains structurally dispersed across national markets and procurement systems.
Key characteristics include:
More than 2,500 defence-related SMEs embedded in supply chains
SMEs representing 99% of all European enterprises, including dual-use sectors
Approximately 600,000 direct defence industry jobs, with over 1 million across aerospace and defence-adjacent sectors
Strong innovation capacity but uneven cross-border industrial integration
Despite its scale, Europe’s defence industrial base is constrained by:
fragmented procurement systems
national certification and compliance barriers
limited SME access to large-scale defence programmes
duplication of capability development across Member States
The result is a system that is highly capable locally, but not yet fully optimised at the European level.
SMEs as Strategic Defence Capability Drivers
Small and medium-sized enterprises are increasingly central to defence innovation and resilience.
Their contribution is particularly visible in:
autonomous and unmanned systems
cyber defence and digital resilience
AI-enabled decision systems
advanced manufacturing and materials
sensor technologies and ISR solutions
dual-use civilian-to-defence technology transfer
SMEs bring structural advantages that complement larger primes:
faster innovation cycles
higher specialisation
agility in emerging technology domains
stronger integration with civilian R&D ecosystems
European institutions, including the European Defence Agency, have repeatedly highlighted the need to improve SME integration into procurement and capability development frameworks to enhance innovation velocity and resilience.
Structural Constraints to Scaling SME Impact
Despite their importance, SMEs remain under-leveraged within the European defence ecosystem due to persistent structural barriers:
fragmented regulatory and certification environments across Member States
limited cross-border procurement accessibility
high administrative complexity in defence contracting
uneven participation in EU-level programmes
financing constraints in certain segments of the defence innovation cycle
These constraints reduce Europe’s ability to translate increased defence spending into scalable, interoperable capability.
Sweden and Canada: Cooperative Industrial Models
Sweden: Integrated National-Industrial Defence Strategy
Sweden demonstrates the value of tightly integrated defence ecosystems, combining:
strong coordination between government and industry
advanced domestic defence manufacturing capability
high levels of innovation in aerospace, maritime, and systems integration
rapid alignment with NATO standards and interoperability requirements
Its model illustrates how mid-sized states can generate strategic relevance through industrial coherence rather than scale alone.
Canada: Transatlantic Industrial Alignment
Canada is increasingly integrated into European defence and NATO-aligned industrial frameworks, particularly in:
Arctic and northern security domains
aerospace and dual-use technology sectors
interoperability-focused procurement programmes
transatlantic supply chain resilience initiatives
Together, Sweden and Canada highlight a broader shift toward networked defence industrial cooperation among allied states.
From Industrial Hierarchies to Industrial Ecosystems
Europe’s traditional defence model has been centred on national primes and hierarchical supply chains. This model is evolving toward a more distributed structure:
primes as system integrators
SMEs as innovation engines
governments as strategic demand architects
cross-border ecosystems as resilience mechanisms
This transition is not optional. It is a response to the increasing complexity and tempo of modern defence requirements.
Strategic Implication: Defence as a Coordinated System
The defining challenge for Europe is not a lack of capability, but a lack of integration.
Global competitors demonstrate contrasting advantages:
the United States: scale and industrial consolidation
China: state-coordinated industrial mobilisation
Europe: high capability but fragmented execution
Closing this gap requires treating defence not as a procurement function, but as a coordinated industrial system.
This shift requires:
deeper SME integration into procurement pipelines
harmonisation of cross-border certification and standards
stronger dual-use technology pathways
improved coordination between national and EU-level defence frameworks
Conclusion: Integration as Strategic Advantage
Europe’s strategic future will not be determined solely by the level of defence spending, but by the effectiveness of its industrial coordination. SMEs are central to this equation. They are not peripheral suppliers, but core contributors to innovation, resilience, and adaptability.
The key requirement is integration at scale and at speed.
Europe already possesses the industrial and technological foundations required for strategic autonomy. The challenge now is to connect them into a coherent system capable of operating under sustained geopolitical pressure. In an era defined by systemic competition, the decisive advantage will belong not to the largest individual actors, but to the most effectively integrated industrial ecosystems.
Europe’s task is clear: to become one.
About the Author: Nic has advised a number of leading defence, security, energy, fintech, HNWI/funds, political, and oil & gas stakeholders across the world. With nearly 20 years of industry experience, Nic provides strategic guidance on all aspects of communications, risk management, and stakeholder engagement, with a particular focus on defence, security policy, and geopolitical strategy. He facilitates connections at the highest levels across government, military, and private sectors.
Nic also serves as chair of a number of industry events and is a frequent media contributor, speaking on topics including defence and security, energy, geopolitics, and the Former Soviet Union. He is a volunteer crew member with the Royal National Lifeboat Institution (RNLI), the UK’s volunteer-based charity saving lives at sea.
In 2024, Nic was made a Knight Commander of the Order des Belges (TME CdB) for humanitarian services.
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