Defence Spending and Private Sector Investment in 2025
Written By
Partner
UK
I am a specialist in outsourcing and large scale technology projects and co-head the firm's Technology Transactions and International Outsourcing practice groups.
Senior Associate
UK
As a senior associate in the Tech Transactions team, I primarily advise clients on technology contracts across the Technology and Defence sectors. I focus on emerging and cutting edge technology (Artificial Intelligence in particular), more 'traditional' defence contracting, and the intersection of the two - helping clients navigate the rapidly evolving Defence Tech sector.
Global military spending reached approximately $2.443 trillion for the year 2023, with spending increases in military budgets seen across all 5 geographical regions as specified by the Stockholm International Peace Research Institute (SIPRI). Considering examples at a national level, the United Kingdom has committed an additional £2.9 billion to its defence budget for the upcoming year, ensuring that it meets and exceeds its NATO commitments. Taiwan is reportedly considering substantial defence purchases from the United States to strengthen its military capabilities in response to regional threats. For the European Union, changes in spending policies have been announced to potentially redirect billions of euros of the EU budget’s “cohesion funds” for defence and security applications.
The trend of rising defence budgets is not only benefiting traditional defence giants but also giving rise to opportunities for other entrants to the sector. The European Union has announced initiatives including the potential FAST (Fund to Accelerate defence Supply chains Transformation) program, which focuses on supporting SMEs via access to debt and/or equity financing in order to ramp up production capabilities.
Companies including Anduril, Shield AI, and Helsing have successfully secured significant investment rounds, demonstrating investor interest in advanced defence technologies. These companies are known for their work in AI-driven autonomous systems, AI-powered drones and AI-based software, improving decision-making and operational effectiveness in defence contexts. On the other hand, it is reported that there may be a weaker investment appetite from institutional investors and venture capitalists due to inherent restrictions on investment types and conflict with ESG investment criteria, causing some defence technology companies to try to classify their technologies as “dual use”.
The trend towards increasingly specialised defence solutions is also contributing to the growing involvement of the private sector. As defence contractors increasingly focus on niche capabilities, such as artificial intelligence, cyber defence, and autonomous systems, the potential role of the private sector in the defence industry continues to expand.
Our international defence and security team have worked with Lexology on the publication of Lexology Panoramic: Defence & Security Procurement. The team has written the global overview, the France, Germany, Italy, Poland, UK, Denmark, Sweden, Hungary and Australia chapters and Mark Leach and Will Bryson are contributing editors for the publication. All content on the hub is reproduced with permission from Law Business Research Ltd and was first published in Lexology Panoramic. For further information please visit: https://www.lexology.com/panoramic
