European Defence Market Guide for North American Manufacturers

Europe is investing heavily in defence capabilities, creating new opportunities for North American manufacturers across equipment, components and defence technologies. However, entering the European defence market requires more than identifying increased budgets. Companies need to understand national procurement systems, local supply chains, regulatory requirements and the organisations that influence purchasing decisions.

For a North American defence manufacturer, a successful European market entry typically starts with selecting priority countries, validating demand, mapping potential customers and partners, and establishing local business development capabilities before committing to a permanent European operation.

European defence spending has increased significantly in recent years.

EU Member States spent approximately €418 billion on defence in 2025, equivalent to 2.2% of their combined GDP. Spending is projected to reach around €454 billion in 2026, while defence investment is expected to reach approximately €163 billion. 

Equipment is an important part of that investment. Spending on defence equipment procurement reached €115 billion in 2025, while spending on defence research and development reached €17 billion and is expected to rise to €20 billion in 2026. 

European defence investment is therefore expanding across several areas, including:

• equipment and components;
• manufacturing capacity;
• digital and enabling technologies;
• research and development;
• cyber defence;
• electronic warfare;
• drones and counter-drone technologies;
• communications and multi-domain technologies.
  
  

The EU is also supporting collaborative defence development through initiatives such as the European Defence Fund. Its 2021-2027 budget totals nearly €7.3 billion, including funding for collaborative research and capability-development projects. The 2026 programme alone earmarked €1 billion for collaborative defence R&D.

For North American manufacturers, growing expenditure creates potential demand, but not automatic market access. Understanding where the company's product fits within European priorities remains essential.

Is Europe One Defence Market?

No. Europe should not be approached as one uniform defence market.

Although European cooperation is increasing, defence and security remain largely national competences. Countries maintain different budgets, priorities, procurement processes, industrial capabilities and supplier ecosystems.

A North American manufacturer should therefore evaluate individual countries rather than beginning with a Europe-wide sales strategy.

Important questions include:

• Which countries require the technology or product?
• Which programmes are relevant?
• Who currently supplies comparable solutions?
• Are purchases made directly or through OEMs and integrators?
• Are there local-content, procurement or security requirements?
• Which certifications or approvals apply?
• Who influences the purchasing decision?
  
  

Answering these questions helps manufacturers focus resources on markets where they have a realistic opportunity to compete.

Who Buys Defence Products in Europe?

The answer depends heavily on the product.

Potential customers, partners and influencers can include:

• national defence ministries and procurement organisations;
• defence OEMs and prime contractors;
• systems integrators;
• Tier 1 and Tier 2 manufacturers;
• specialised distributors;
• engineering and technology companies;
• programme and supply-chain partners.
  
  

For many North American suppliers, the most realistic route to market may not involve selling directly to a government organisation.

A component manufacturer, for example, may need to become part of the supply chain of a European OEM or integrator. A technology company may instead need an industry partner that can integrate its solution into a broader platform.

Mapping the complete buying chain is therefore more useful than simply creating a list of European defence companies.

What Are the Main Challenges of Entering the European Defence Market?

1. Fragmented national markets

Different countries have different defence priorities and industrial structures.

The markets that offer the greatest potential should therefore be determined by product-market fit rather than market size alone.

2. Complex procurement

Defence purchasing can involve government organisations, prime contractors, manufacturers, integrators and other stakeholders.

Understanding who specifies, approves, integrates and ultimately purchases a product is essential before beginning outreach.

3. Long sales cycles

Defence business development can require technical reviews, qualification, procurement procedures and multiple stakeholders.

Companies should therefore enter the market with realistic expectations about how quickly European activity will translate into revenue.

4. Established supplier networks

European OEMs and manufacturers often operate within mature supplier ecosystems.

New entrants need to establish credibility and demonstrate why their product or technology provides relevant value.

5. Regulatory and security requirements

Compliance requirements depend on the product, end user, destination and transaction structure.

Depending on the business, manufacturers may need to consider export controls, security requirements, certifications, procurement rules and other national or EU requirements before pursuing particular opportunities.

This should be assessed before significant commercial investment, not once a deal is close to completion.

How Can North American Defence Manufacturers Enter the European Market?

A practical European market-entry strategy can be divided into five stages.

Step 1: Prioritise European markets

Start by comparing countries based on:

• product demand;
• defence priorities;
• relevant programmes;
• addressable customers;
• existing competitors;
• procurement accessibility;
• local industry and supply chains.
  
  

The objective is not to find the "largest" European market, but the markets where your company has the strongest realistic product-market fit.

Step 2: Map customers, partners and decision-makers

Once the target countries are selected, identify how your product could reach the end customer.

Create a market map covering:

End user → prime/OEM → integrator → supplier → your company

The precise chain will differ by product.

Understanding it helps determine whether direct sales, partnerships, local representation or another market-entry model makes the most sense.

Step 3: Validate demand

Before establishing a European entity or building a large local team, speak directly with relevant market participants.

Use early business development to determine:

• whether customers recognise the problem your product solves;
• whether the product meets their technical expectations;
• who currently provides the alternative;
• what prevents prospects from changing suppliers;
• how European purchasing decisions are made.
  
  

A qualified conversation with the right prospect provides better evidence of market potential than a large database of unvalidated leads.

Step 4: Establish local business development

Defence remains highly relationship-driven.

European trade shows, supplier meetings, industry associations and in-person prospect visits can strengthen credibility and provide access to relevant networks.

A local European business development presence can also maintain regular contact with prospects while the North American team focuses on the domestic business.

Step 5: Build and measure the sales pipeline

European market entry should produce measurable commercial progress.

Track prospects through:

Target account → contact → qualified lead → opportunity → proposal/project → customer

This provides clearer visibility into market potential and helps companies decide whether additional European investment is justified.

Do North American Defence Companies Need a European Office?

Not necessarily.

Opening an office before validating commercial demand can create unnecessary fixed costs.

A North American manufacturer can initially enter Europe through:

• direct export sales;
• distributors or partners;
• local representatives;
• outsourced European business development;
• its own European sales employee.
  
  

Once demand and pipeline are demonstrated, establishing a permanent European operation may be the logical next step.

For companies still testing the market, outsourced business development can provide local coverage without requiring an immediate investment in a complete European sales infrastructure.

Is the European Defence Fund Available to North American Companies?

North American companies should not assume that increased EU defence funding means they can directly access that funding.

Under current European Defence Fund rules, recipients and subcontractors generally must be EU-based, and restrictions apply to control by non-associated third countries. Participation by entities from non-associated third countries can occur under specific conditions, but they do not receive EDF funding.

This distinction is important: European defence spending can generate commercial opportunities without making a North American company directly eligible for a particular EU funding programme.

Companies should evaluate the rules of each relevant programme and procurement opportunity individually.