Defence spending alone won’t save Europe - it’s time for a radical shift in strategy

26 February 2025, 15:51 | Updated: 26 February 2025, 15:54

Since the 1980s, Europe - including the UK - has been consistently outspent on defence by global peers and adversaries alike.

Well known in defence and security circles, this had now captured headlines.

Yesterday’s announcement by the UK Government to fund a rearmament programme not seen since the Cold War, is a move in the right direction for achieving greater security independence. Yet given the historic underspend by the UK and other European NATO members, it won’t solve the problem overnight.

There is often a fixation on the percentage of GDP spent on defence. After all, China has spent more on defence than the top five European NATO members combined since 2007.

And since 1990 the UK has had four years where spending on defence has dropped by more than 10% in absolute terms. However, focusing on one number alone is only one element.

If Europe is to stand on its own two feet, there is a set of complex challenges that it must overcome - alongside an increase in defence spending. As it stands, 75% of defence projects run over time and 40% over budget, according to Boston Consulting Group analysis of European NATO projects. In addition, around 40% of defence capabilities are acquired from outside the region - with the UK among the most reliant amongst European allies.

Some fundamentals must be fixed: a shortage of skilled workers, unclear targets and incentives and - most importantly - a lack of coordination between European governments.

Understandably, all nations have their own sovereign and political agendas, and many want their own capabilities across all domains. However, this has led to a multitude of national variants of critical kit across European allies that are increasingly difficult and expensive to maintain while providing no battlefield advantage.

For example, the US has one main battle tank to Europe’s NATO members’ 17, the US has four types of destroyers and frigates to Europe’s 29, and the US has six fighter planes to Europe’s 20.

To further complicate the picture, Europe also has a complex web of 80 active alliances and defence cooperation agreements - the UK alone has more than 10. This only adds to the difficulty of forging a united defence approach at a time when the threat level from state and non-state adversaries continues to rise.

And looking at the supply chain for our defence industry, Europe is almost entirely reliant on China for the materials needed to serve its industrial defence base.

There is no silver bullet, yet Europe can begin to overcome the combined challenges of scale, pace and adaptability. Greater cooperation is needed between government and industry to work in a more coordinated and intentional way. Defence ministries must set the agenda and demand profile, providing real-time monitoring of mission readiness, stockpile levels, production rates and anticipate supply chain bottlenecks.

Governments must contractually incentivise manufacturers to hit targets and meet deadlines, and they should work with industry to bolster the wider workforce to ensure Europe has the right skills at the right time to accommodate ramp-up in demand.

And finally, innovation must accelerate where it matters most. More start-ups are needed to capture white space and increase competition, European nations need to break down barriers between knowledge-sharing with allies, and - where applicable - increase risk appetite to speed up innovation as we’ve seen with development and deployment in Ukraine.

Increased spending is a good start but without addressing some of the fundamentals of Europe’s defence capabilities, the gap between ourselves and our adversaries will only get wider.

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Diana Dimitrova is Managing Director & Partner London, at Boston Consulting Group.

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