Financial Hurdles Stifle Europe's Small Defence Firms Amid Rising Demand

European small and medium-sized defence companies face financial challenges due to limited access to funding, red tape, and ESG-related banking reluctance, despite a surge in demand driven by conflicts such as the Ukraine war. Efforts to address these issues are ongoing, with calls for improved financing solutions.

Amid escalating global conflicts, Europe's small and medium-sized defence companies are struggling to secure the necessary financing to innovate and expand, according to industry experts and government officials. Although global military spending reached $2.44 trillion in 2023, smaller firms face barriers like limited public funding and stringent ESG regulations.

Challenges persist within the European defence sector, as red tape and banks' cautious approaches deter lending to smaller companies. This financial strain hampers growth and forces firms to seek funding alternatives outside the EU. A European Commission report highlighted a financing gap impacting small enterprises, urging for policy changes to ease access to ventures.

NATO and EU governments are exploring solutions, such as co-financing small businesses and bolstering venture capital initiatives, but disparities remain. The U.S. dominates venture capital funding, leaving European firms at a disadvantage. As pressure mounts on the industry, experts call for systemic reform to uplift smaller players in this critical sector.

(With inputs from agencies.)