European Union countries belonging to NATO spent an average of 2.5% of GDP on defence in 2025, while approximately 40% of expenditure on military equipment went to suppliers outside Europe.
The defence industry is attracting growing interest from investors. European companies, however, still have more limited access to financing than their competitors in the United States. In Poland, an additional challenge is the relatively weak presence of domestic defence companies on international markets, even though several Polish technologies have already gained recognition abroad.
Defence is becoming more attractive to investors
“The defence industry is no longer toxic for investors. For many years, companies operating in this sector struggled to obtain capital for development. Today, the defence industry has become a national asset for every country concerned about its security, which makes growth considerably easier,” Zbigniew Pisarski, President of the Casimir Pulaski Foundation, told the Newseria news agency.
Europe nevertheless continues to face limitations compared with the United States, particularly regarding its financing model.
“In Europe, debt capital remains dominant, while the American market is based primarily on equity capital, which is much more willing to accept risk and support the development of new technologies,” Pisarski explained.
According to a McKinsey analysis, venture capital investment in European defence-tech start-ups increased by more than 500% between 2021 and 2024 compared with the previous three-year period.
Despite this rapid growth, the number of large financing rounds in the United States remains between two and four times higher than in Europe. In transactions worth more than $200 million, over 60% of the capital raised by European start-ups comes from American investors.
European defence start-ups raise record funding
The growing interest of investors is also confirmed by data from the NATO Innovation Fund and Dealroom.
In 2025, European start-ups operating in the defence, security and resilience sectors raised a record $8.7 billion in venture capital financing, an increase of 55% compared with the previous year.
Companies developing artificial intelligence-based solutions and dual-use technologies are expanding particularly rapidly.
“The defence sector is now having its moment. For decades to come, Poland and other countries in the region will be replenishing military equipment stocks that have been significantly depleted,” Pisarski said.
“Investment in this sector is based on relatively healthy fundamentals, meaning that the capital invested can generate returns. It is therefore worth looking for such funding. Unfortunately, Poland still has too little of it, and the available capital is concentrated mainly in debt financing through the banking sector,” he added.
Polish banks increase their involvement in defence
Research conducted by the Polish Bank Association shows that approximately 80% of the country’s banking sector, measured by its share of total assets, is involved in financing projects connected with security and defence.
Nearly 70% of the sector finances dual-use projects, around half participates in financing weapons purchases and more than 30% supports the development of new technologies.
Pisarski expressed hope that the Warsaw Stock Exchange would become more attractive to investors, as equity capital is particularly important for supporting innovation.
“Unfortunately, many creators of modern technologies only begin to develop their projects after leaving Poland. I would like them to be able to build such companies here in the future, using domestic capital and Polish research and development facilities,” he said.
Geopolitical changes support defence investment
According to Pisarski, geopolitical changes initiated by Russia’s invasion of Ukraine have created political acceptance for allocating public funds to the defence industry and the broader security sector.
Defence spending by European countries has been increasing steadily.
According to the Oxford Economics report Rearming Europe – Capacity and Fiscal Constraints Cap the Economic Dividend, approximately two-thirds of new defence expenditure will be allocated to weapons and military equipment.
At the same time, around 40% of spending on military equipment currently goes to manufacturers outside Europe. By the end of the decade, approximately half of all newly purchased military equipment is still expected to come from imports, primarily from the United States.
Oxford Economics estimates that increased defence spending could raise European industrial output by 1.2% by 2030 compared with previous forecasts.
Achieving this potential will require a significant increase in production capacity.
The main barriers include shortages of qualified workers, insufficient manufacturing capacity, dependence on imported advanced technologies such as artificial intelligence systems and microchips, and the fragmentation of Europe’s defence industry.
Poland has an opportunity to develop its defence industry
For Poland, higher defence spending represents not only an opportunity to modernise the armed forces but also a chance to develop domestic industry and increase exports.
“Exports remain largely unexplored territory for the Polish defence industry. For many years, Poland was caught in the middle-income trap, and domestic entrepreneurs focused primarily on supplying products to customers within the country,” Pisarski said.
“With sufficient support from government ministers and institutions responsible for promoting exports, Polish companies have an opportunity to establish a strong position on international markets,” he added.
According to the Łukasiewicz Research Network report Poland’s Position in the Global Defence Industry Value Chain, Poland will allocate PLN 201 billion to defence in 2026, equivalent to 4.8% of GDP.
This is expected to be the highest level among NATO countries.
The authors of the report argue that the economic impact of this record expenditure will depend primarily on the participation of Polish companies in defence programmes, the development of research and development activities and the effective transfer of technology.
Polish companies should join international supply chains
“For a long time, Polish companies mainly operated as subcontractors in the international defence market. As defence spending increases, Poland should demand more strongly that its companies are effectively included in global supply chains,” Pisarski said.
The war in Ukraine has demonstrated that technologies developed in Poland can attract international demand.
“Polish technologies such as drones and the Piorun man-portable air-defence system have gained considerable attention and are increasingly being purchased by foreign customers,” he added.
In Pisarski’s view, expanding the international presence of Polish defence companies will require political support and coordination at the national level.
Government institutions should more actively include small and medium-sized defence companies in economic missions to foreign markets and present their technologies to potential customers.
“These companies often lack sufficient capital, confidence or tools to develop international sales. This is where the state, public institutions and public funding should play an important role,” Pisarski said.
“The defence industry was largely neglected for many years when it came to export support. That now needs to change.”
