Latest news Ukraine

European arms manufacturers lack funds despite record global military spending

European defense companies face a critical financing gap of up to 2 billion euros ($2.1 bn), threatening innovation in the arms industry.

byMaria Tril

31/10/2024

2 minute read

Production line of 155mm artillery ammunition at the facilities of the Rheinmetall plant, July 6, 2023. Credt: Fabian Bimmer

European arms manufacturers lack funds despite record global military spending

Small and medium-sized defense companies in Europe are grappling with significant financial challenges, even as global military expenditure reaches an all-time high of $2.44 trillion in 2023, according to a Reuters report.

The ongoing Russian war against Ukraine has increased geopolitical tensions and military spending, yet created a complex financing environment for European defense SMEs.

While the war has highlighted the urgent need for defense modernization and expanded military capabilities, traditional financial institutions remain cautious about investing due to ESG concerns and the inherent risks of the defense sector.

The Stockholm International Peace Research Institute reports that military spending increased by 6.8% from the previous year, marking the highest level since 2009.

European defense sector firms are struggling to access critical financing needed for innovation and production expansion, Reuters reported.

A 2024 European Commission report reveals a financing gap, estimating that small and medium-sized enterprises (SMEs) in the EU defense sector face a debt financing barrier between 1 billion and 2 billion euros (up to $2.1 bn).

This funding shortage is driven by multiple factors, including banks’ hesitancy due to environmental, social, and governance (ESG) regulations.

Managing Director of the Defence and Security Industry Association of the Czech Republic, Jiri Hynek, said that most of the problems in recent times in the defense and security industry have continued or deepened.

The United States dominates venture capital funding in defense, securing 83% of investments among NATO allies since 2018.

Read also:

You could close this page. Or you could join our community and help us produce more materials like this. We keep our reporting open and accessible to everyone because we believe in the power of free information. This is why our small, cost-effective team depends on the support of readers like you to bring deliver timely news, quality analysis, and on-the-ground reports about Russia's war against Ukraine and Ukraine's struggle to build a democratic society. A little bit goes a long way: for as little as the cost of one cup of coffee a month, you can help build bridges between Ukraine and the rest of the world, plus become a co-creator and vote for topics we should cover next. Become a patron or see other ways to support. Become a Patron!

To suggest a correction or clarification, write to us here

You can also highlight the text and press Ctrl + Enter

We are an independent media outlet that relies solely on advertising revenue to sustain itself. We do not endorse or promote any products or services for financial gain. Therefore, we kindly ask for your support by disabling your ad blocker. Your assistance helps us continue providing quality content. Thank you!