This report, jointly published by the Milken Institute and Oliver Wyman, sets out to help governments and investors navigate this new environment. It elucidates the scale of the challenge Europe faces in addressing diverse new threats and identifies solutions that governments, finance, and the defence industry should implement. Even with rising budgets, Europe risks falling short by 2030 unless expenditures consistently address new capability gaps. A new wave of defence investment could not only bolster national security but also drive economic growth and strengthen European strategic autonomy.
Three key themes emerge:
1. Governments should more proactively engage Europe’s innovation ecosystem to locate, test, and scale the products and technologies necessary to keep pace with adversaries. As the Ukraine War has shown, compressing innovation cycles in technologies such as drones can decisively shape battlefield outcomes, and Europe’s defence ecosystem must be nimble enough to ensure that rapid innovation translates into raw capability.
2. National approaches alone cannot deliver sustainable defence readiness. By consolidating duplicative programmes, pooling investments in shared capabilities, and speaking with a unified voice to industry, European governments can unlock economies of scale, attract private investment, and close critical readiness gaps at pace.
3. Increased government spending alone is not enough. Asset allocators can seek returns across every asset class and geography, and aligned incentives are vital to unlocking private capital to scale capacity and Europe’s industrial base. There is a significant opportunity for governments and investors to work together, giving the sector renewed attention from the investment community.