European Defense Industry Is the Global Growth Laggard

European Commission President Ursula von der Leyen has called for increased European defense spending under the “ReArm Europe” plan, following Washington’s decision to suspend military aid to Ukraine. According to Radio France Internationale, the announcement from Brussels has triggered a rapid rise in the share prices of European arms companies and sent the bloc’s weapons manufacturers racing to secure contracts.

It’s a well-known and grim reality that wars make money and it stands to reason that weapons manufacturers gain from them. The Stockholm International Peace Research Institute’s (SIPRI) list of the biggest 100 weapons companies in the world illustrates this, showing that arms revenue increases were seen in all regions. As the below chart shows, following the invasion of Ukraine in 2022, Russia’s two arms companies in the Top 100 together saw revenues increase by 40 percent to reach $25.5 billion.

Although European weapons and military services companies accounted for a substantial share of the Top 100’s total revenue at $133 billion, the region saw low growth between 2022 and 2023. This could change with the new ReArm Europe plans, but companies would have to be able to gear up their production quickly.

Conflict in the Middle East also drove up revenues of arms companies in the region. Six of the Top 100 companies were in the Middle East in 2023, three of which were in Israel. SIPRI analysts state that following the war in Gaza, the arms revenue of the three Israeli-based companies reached $13.6 billion.

In 2023, the combined revenue of sales of arms and military services of the Top 100 amounted to $632 billion, up 4.2 percent from 2022. The U.S. had the highest number of arms companies in the Top 100 of any country at 41, which together had a revenue of $317 billion, while Europe had 27 companies in the Top 100 and Asia and Oceania had 23.