EU Defence Spending Hits $381B in 2025 with $800B Planned Through 2030
EU defence spending hit $381B in 2025 with $800B planned through 2030; a 55% buy-European mandate strains a contracted manufacturing base and lengthens commercial lead times.
European Union defence spending reached $381B in 2025, an 11% increase over the prior year, according to the SIPRI Military Expenditure Database (2025 edition, April 2026 release). Planned spending through 2030 exceeds $800B. For the first time, all 32 NATO members meet the alliance's 2% of GDP defence spending target, according to the NATO Annual Report 2025 (published March 2026).
Germany commits EUR 100B special fund
Germany has committed a EUR 100B special fund for military modernisation, with defence spending projected to rise from EUR 86B to EUR 152B by 2029, according to the German Federal Budget 2025-2029. France, Poland, the United Kingdom, and the Nordic countries are on similar upward trajectories.
55% buy-European mandate by 2030
The EU has legislated that 55% of all military procurement must come from European factories by 2030, according to the European Defence Agency's Defence Data Report (2025 edition). This mandate intersects with a European manufacturing base that has contracted over the past two decades. European defence and industrial firms are being asked to absorb a dramatically increased share of defence orders while managing existing commercial backlogs.
Industrial capacity constraints
Defence manufacturing draws on the same industrial inputs as commercial manufacturing: precision-machined steel, specialty metals, electronics, composites, castings, and forgings. When governments award multi-billion-euro contracts for armored vehicles, naval vessels, or aircraft, the factories producing those items reduce availability for commercial orders.
Across 32 NATO countries simultaneously increasing defence procurement, the cumulative effect is a continent-wide capacity constraint on precision manufacturing. European factories that previously had capacity for commercial orders are being pulled into defence production.
According to the European Defence Agency's Defence Data Report (2025 edition), lead times on precision components and specialty steels in Germany and France have been extending since mid-2025.
Scale of the capacity gap
The 55% buy-European mandate requires European factories to produce more than half of a defence budget that has grown by double digits year over year. The European Defence Agency's Defence Data Report (2025 edition) indicates that the continent's industrial base, after two decades of contraction, faces a structural mismatch between the volume of orders entering the pipeline and the manufacturing capacity available to fulfill them.
The resulting dynamic is straightforward: fixed manufacturing capacity facing increased demand from defence budgets means reduced availability for non-defence production, with longer lead times and upward pressure on pricing for commercial buyers competing for the same factory time.
Sources: SIPRI Military Expenditure Database (2025 edition, April 2026 release); NATO Annual Report 2025 (published March 2026); European Defence Agency, Defence Data Report (2025 edition); German Federal Budget 2025-2029 (Bundeshaushalt, approved December 2024).
