Russia's war of aggression against Ukraine has laid bare the challenges facing the EU's defence industry as it tries to meet increased demand and ramp up production in the wake of a fundamentally changed security environment in Europe. The EU's defence industry comprises a number of large multinational companies, mid-caps and a large number of small and medium-sized enterprises. It faces a multitude of challenges, such as decades of under-investment, fragmentation, insufficient critical raw material and semiconductor supplies, and a lack of manufacturing capacity. The EU and its Member States have taken several steps to reinforce the European defence industry, especially since the start of Russia's war against Ukraine. Member States have boosted their defence budgets, with their combined total estimated to have reached €381 billion in 2025. The European Defence Fund is investing in research and capability development projects and has achieved very positive results so far. Permanent structured cooperation provides the legal framework and binding commitments for progress in collaborative defence. The EU has also broken taboos by agreeing on a joint defence procurement instrument and an initiative to build up ammunition production. These form part of a three-track proposal to support Ukraine's needs for ammunition (deliver ammunition from existing stocks, jointly procure from industry and support the ramping up of production). In March 2024, the European Commission proposed the first-ever European defence industrial strategy, and the defence industry programme to implement it was formally adopted in December 2025. In 2025, the EU also put forward the white paper for European defence readiness 2030, the ReArm Europe plan (including the SAFE instrument), the defence omnibus packages, and the European defence industry transformation roadmap. Additionally, the European Peace Facility, best known for facilitating lethal weapon supply to Ukraine, is being used to procure defence materiel from the EU's defence industry, further boosting its capacity. The European Chips Act and Critical Raw Materials Act are also expected to benefit the European defence industry by ensuring it has the necessary supplies to tackle the substantially increased demand for its products. These signals have led the industry to take the first steps to increase production capacity. This updates a previous edition, published in 2024. Source : © European Union, 2026 - EP Read more