Aerospace & Defence
The European Union’s Aerospace & Defence sector in 2025 is experiencing significant growth and transformation, driven by heightened geopolitical tensions, increased defence spending, and a push for technological advancement and strategic autonomy.
The European civil aerospace sector is a major pillar of the European economy, generating a turnover of approximately €160 billion and employing over 1 million workers throughout the EU and beyond.
Defence industries are major contributors to the European economy with a turnover of €100 billion/year and €1.4 million highly skilled employees. Moreover, they generate spin-off technologies which reinforce the competitiveness of other sectors such as aviation, space and electronics.
Brussels-based NATO HQ is also a strategic centre for the defence industry together with the EU. The EU and NATO have respectively 27 and 31 member states, of which 22 states are members of both. Indeed, the war in Ukraine is massively ramping up defence spending among EU member states, notably in Germany which has agreed to change its constitution to allow for a credit-based special defence fund. Inevitably increased defence spending in such a politicised environment is resulting in more lobbying and activity in Brussels.
The European Commission’s ReArm Europe Plan/Readiness 2030, presented in March 2025, proposes to leverage over €800 billion in defence spending through national fiscal flexibility, a new €150 billion loan instrument (SAFE) for joint procurement, potential redirection of cohesion funds, and expanded European Investment Bank support. It also aims to mobilise private capital through the savings and investments union.
European nations are reevaluating their reliance on American weaponry due to geopolitical uncertainties. The EU is implementing a major loan program prioritizing EU-manufactured defence systems. Europe is focusing on closing the gap with the U.S. and China in defence AI by increasing R&D investments.
Companies like Airbus are advocating for increased defence spending and consolidation within Europe’s fragmented defence industry to remain competitive amidst geopolitical tensions. Meanwhile the trade war instigated by Trump against the rest of the world and China specifically is creating opportunities for European manufacturers. Notably in April, China ordered its airlines not to take further deliveries of Boeing in response to the U.S. decision to impose 145% tariffs on Chinese goods.