International defence contracts within NATO and the European Union represent some of the most lucrative yet highly competitive opportunities available to suppliers today. With budgets rising across Europe, a renewed emphasis on joint procurement, and a strong push for innovation, these environments offer both significant potential and considerable complexity. For companies aiming to expand globally — whether established defence contractors or SMEs taking their first steps into international markets — the ability to navigate EU and NATO frameworks is becoming essential.
In this guide, we not only explore the EU and NATO procurement landscape but also highlight the latest spending priorities, key players, and market trends shaping opportunities in 2025 and beyond. We provide practical, actionable strategies designed to help UK and European suppliers secure contracts, and we illustrate how Defence Contracts International (DCI) can give your business the intelligence, tools, and support to compete with confidence.
Understanding the Landscape
EU Defence Contracts & Defence Spending
The European Union has expanded joint defence initiatives in recent years, with the European Defence Fund (EDF) at the centre. The EDF, budgeted at around €13 billion for 2021–2027, allocates 5% specifically to disruptive, high-risk innovation — supporting Europe’s ambition to enhance technological leadership and autonomy. The European Commission plays a key role in shaping and funding these defence initiatives, while the European Defence Agency coordinates efforts among EU member states to strengthen the EU policy framework and industrial policy at the European level.
Key features of EU defence procurement include:
- EDF programmes: Support both research (funded up to 100%) and development (up to 80%).
- Collaboration focus: Projects often require cross-border partnerships, encouraging SME participation alongside primes.
- Growth sectors: Cybersecurity, AI, autonomous systems, green defence initiatives, and sustainable supply chains are high priorities across EU tenders.
Beyond the EDF, the EU has introduced additional joint funding streams and loan guarantees to accelerate production and scale up Europe’s industrial base. Recent initiatives include fast-tracked ammunition procurement in response to the Ukraine conflict and large-scale investments in next-generation fighter aircraft under the Future Combat Air System programme. These measures reflect Europe’s determination to build sovereign capability and reduce reliance on external suppliers.
EU defence spending is currently valued at over €240 billion and continues to grow as member states modernise capabilities. Even countries traditionally below NATO’s 2% GDP target are ramping up their budgets, with Germany committing to exceed 2% and Poland pledging spending above 3% by the end of the decade. For suppliers, aligning bids with these EU-wide priorities — from cyber resilience to sustainable defence innovation — is crucial.
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NATO Procurement, Defence Contracts & Spending
NATO’s collective defence posture translates into significant procurement opportunities for member-nation suppliers. Allies are under pressure to meet — and now often exceed — the 2% of GDP defence spending target, with some nations already pledging increases beyond 2025. For instance, the UK currently spends around 2.6% of GDP on defence, surpassing NATO’s baseline. Looking further ahead, NATO leaders have discussed even more ambitious pledges, including a move towards 5% of GDP by the mid-2030s in response to heightened geopolitical tensions.
The NATO Investment Committee oversees the NATO Security Investment Programme, ensuring that NATO common funding is allocated to collective military requirements and capabilities among member countries and NATO members.
NATO procurement agencies manage a range of procurement processes for defence equipment, weapons systems, and military systems. National authorities, government departments, and the private sector are all involved in these procurement processes, with procurement rules and national procurement practices shaping how contracts are awarded and managed.
International Competitive Bidding (ICB) is the primary method for awarding contracts, allowing eligible companies from participating nations to compete. Third countries may participate under specific conditions, and each project typically designates a lead nation to coordinate efforts among all stakeholders.
Interoperability is a core requirement for NATO, ensuring that the armed forces, military forces, and air forces of all member states can operate together using compatible weapons systems, military systems, defence equipment, and war material.
National export control regulations and international traffic restrictions can impact cross-border defence procurement, affecting the ability of companies to participate in multinational projects.
Protecting critical infrastructure is also a key priority in NATO defence planning, as it is essential for operational resilience and security.
Unlike the EU, NATO does not procure as a single entity but via specialised agencies:
- NATO Communications and Information Agency (NCIA) – responsible for IT, communications, cyber, and command-and-control systems.
- NATO Support and Procurement Agency (NSPA) – logistics, infrastructure, equipment acquisition, and multinational support.
NATO contracts are tendered through International Competitive Bidding (ICB), which is open to companies in any member nation. Winning bids must demonstrate interoperability with allied systems, compliance with NATO standards (e.g. AQAP for quality assurance), robust cybersecurity postures, and scalability across multiple countries. In many cases, NATO procurement also favours suppliers who can demonstrate multinational cooperation and long-term sustainment capacity.
For SMEs, NATO success often comes through subcontracting or partnerships with primes, particularly in niche areas such as advanced cyber tools, data analytics, AI-enabled platforms, or specialist components. Increasingly, smaller firms are also being encouraged to participate directly in NATO innovation programmes, such as DIANA and the NATO Innovation Fund, which support disruptive technologies from agile suppliers.
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Key Players & Market Trends
The European defence industry is dominated by large primes such as Airbus, BAE Systems, Thales, Leonardo, Rheinmetall, and MBDA. These companies often lead major consortium bids. However, trends are creating new opportunities:
- Consolidation and partnerships: Large-scale joint ventures are common, particularly for next-generation aircraft or missile systems.
- SME inclusion: Both EU and NATO frameworks encourage SME participation. The UK has set a target for 25% of defence spend to go to SMEs by 2025.
- Innovation funding: Initiatives like NATO’s DIANA (Defence Innovation Accelerator for the North Atlantic) and the NATO Innovation Fund provide routes for tech-driven SMEs to access procurement opportunities. Defence start ups are increasingly driving technological innovation in dual-use technologies and are benefiting from new funding opportunities and support from NATO and the European Investment Fund.
The political economy of defence contracts shapes how member-states approach EU defence policies, balancing national interests and industrial benefits. For suppliers, the message is clear: collaboration among European allies is no longer optional — it is a prerequisite for success in strengthening the market and ensuring collective security.
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How to Win Defence Contracts
Winning EU Defence Contracts
To secure EU opportunities, businesses must:
- Engage early: Respond to Requests for Information, monitor upcoming calls under the EDF, and join industry forums to build visibility before formal tenders are published.
- Understand frameworks: Learn EDF and PESCO requirements, the Common Security and Defence Policy context, and tailor bids to demonstrate contribution to European capability goals. Recognize the role of the High Representative in shaping EU defence policy and decision-making, and ensure compliance with the EU’s legal framework for defence procurement.
- Form cross-border partnerships: Many EU calls require multi-nation consortiums; SMEs can enhance their chances by teaming with primes or other innovative suppliers across different member states.
- Align with EU goals: Demonstrate how your bid supports EU strategic autonomy, SME growth, sustainability objectives, and resilience of the European industrial base.
- Showcase case examples: Highlight previous work with EU members, collaborative projects, or niche technologies that address pressing European priorities such as cyber defence or energy security.
Winning NATO Defence Contracts
For NATO opportunities, suppliers should:
- Register with NATO agencies: Ensure visibility within NCIA and NSPA supplier lists and maintain updated capability statements.
- Demonstrate interoperability: Showcase compliance with NATO standards (such as AQAP quality assurance) and ability to scale across multiple allied nations.
- Target niche expertise: SMEs can succeed by providing unique, specialist capabilities — for example, cyber threat analysis tools or logistics innovations.
- Partner with primes: Subcontracting or joint ventures are often the entry point; consider forming consortia that demonstrate multinational cooperation.
- Engage in NATO innovation: Explore DIANA accelerator opportunities or NATO Innovation Fund programmes, which are increasingly welcoming agile SMEs.
Essential Best Practices
Regardless of whether you are bidding for EU or NATO contracts:
- Compliance is non-negotiable: Maintain certifications such as ISO 9001, ISO 27001, and Cyber Essentials Plus, and be ready to meet security clearance requirements.
- Leverage market intelligence: Use award data and spend analysis to study past winners, competitor strengths, and pricing trends to refine your approach.
- Emphasise value beyond delivery: Highlight contributions such as technology transfer, training, local investment, industrial offsets, and sustainability.
- Submit flawless bids: Follow tender instructions exactly, prepare a compliance matrix, and ensure proposals are fully responsive and well-presented.
Resources & Next Steps
DCI provides a wide range of resources to help suppliers succeed:
- DCI Online Tools: Tender Alerts, Contract Search, Market Leads, Award Data, and Spend Analysis.
- Regional Insights: Europe and NATO-specific portals with the latest defence opportunities.
- Guides & Knowledge Base: Step-by-step guides to bidding, compliance, and MOD processes.
- Events & Webinars: Access thought leadership and networking opportunities at DPRTE and other forums.
Key Takeaway
The NATO and EU defence procurement markets are expanding rapidly, offering billions in opportunities across high-tech, infrastructure, and conventional defence sectors. Yet competition is fierce, and success depends on early engagement, strategic alignment, strong partnerships, and flawless compliance. Suppliers who anticipate future requirements — from advanced digitalisation and AI-enabled systems to greener, more sustainable defence solutions — will be best placed to compete effectively.
For SMEs in particular, opportunities are within reach if they leverage intelligence, collaborate with larger primes, and showcase innovative solutions aligned with EU and NATO priorities. Examples include cyber start-ups securing subcontracting roles on NATO communications projects, or manufacturing SMEs contributing components to multi-nation aircraft programmes. By demonstrating niche expertise and adaptability, smaller businesses can carve out a strong position in these international markets.
Now is the time to act. By using DCI’s tools and expertise, your business can stay ahead of the curve, find the right opportunities, and bid with confidence.
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