European defence industry grapples with soaring budgets and Ukraine‑driven demand

At the Eurosatory defence exhibition near Paris, nearly 80 Ukrainian companies displayed combat‑tested drones, long‑range missiles and other weapons that have been used against Russian forces. Organisers noted that Ukrainian firms are ahead of European rivals, prompting EU armies to seek "shelf‑ready" equipment instead of future‑stage projects.

Europe has responded to the war in Ukraine by raising defence spending to unprecedented levels. In 2024 EU members allocated €343 billion to defence—a 19 % increase over the previous year and 37 % above 2021 levels—bringing many countries to the NATO target of 2 % of GDP. However, the industrial base is struggling to keep pace. Production of ammunition, drones and missile systems remains constrained, and 64 % of European weapons imports still come from the United States. Companies such as Thales, Rheinmetall and Leonardo are expanding capacity, but new factories and supply chains can take years to become operational.