By: Philip Hicks, AG Ambassador for the U.K. & Middle East
Asymmetric warfare is rewriting Europe’s budgets, factories and battlefield playbooks.Europe’s defence spending has surged to historic highs, but the character of that spending is changing. Lessons from Ukraine’s drone-saturated, increasingly autonomy-driven battlefield, where billion-dollar systems can be outmanoeuvred by $500 FPV drones, are driving a pivot toward exquisite capabilities fielded at scale and supply chains that can turn battle-proven innovations in weeks. The continent still needs big platforms for the 2040s, yet 2025–2035 will belong to agile, connected, autonomous and attritable systems, if Europe can industrialise agility, standardise mass, and wire it all through a combat cloud.
Overview: A Battlefield That Bent the Curve
The hum over trench lines in eastern Ukraine was not new, but what followed was. Cheap FPV drones stitched together from commercial parts morphed into precision loitering munitions, harassing armour, rooting artillery and strangling manoeuvre. Analysts observed drone saturation so intense that within ~15 km of the front, vehicle movement became perilous. The Center for Strategic and International Studies (CSIS) reported that commanders attributed 70–80% of casualties to unmanned systems in certain sectors. Output goals leapt from tens of thousands to millions of drones per year. Feedback loops between users at the front and engineers in workshops collapsed from months to days.
What began as a drone revolution has evolved into a wider contest in autonomy. AI-assisted targeting loops, autonomous navigation under jamming, uncrewed ground vehicles (UGVs) for logistics and casualty evacuation (CASEVAC) and maritime uncrewed surface vehicles (USVs) striking at range in the Black Sea. These systems compressed kill chains, expanded ISR reach and forced both sides to adapt tactics weekly.
Layered counter-uncrewed aircraft systems (C-UAS) proved decisive, from German Gepard Self-Propelled Anti-Aircraft Guns (SPAAGs) using Advanced Hit Efficiency and Destruction (AHEAD) munitions to mobile ZU-23s and even shotguns against low-flying first person view drones (FPVs), especially when fused with electronic warfare (EW) sensors and software upgrades.
The Spending Surge: Money Is Necessary, Structure Is Decisive
European Union (EU) defence outlays reached €343bn in 2024, with a projected €381bn in 2025, crossing ~2% of GDP for the first time in European Defence Agency (EDA) records. Investment (pro)curement + major upgrades) exceeded €100bn; Research & Development (R&D rose to €13bn (+20% YoY) and Research & Technology (R&T) hit €5bn. Set against NATO’s new 5% by 2035 framework—3.5% core defence + 1.5% resilience—the implication is stark. By the early 2030s, EU defence budgets may need to exceed €630bn annually to meet alliance planning assumptions, according to ECB Economic Bulletin, Defence Spending and Macroeconomic Implications.
In parallel, Brussels has moved from ad-hoc initiatives to a more coherent industrial blueprint. The European Defence Industrial Strategy (EDIS), unveiled in March 2024, aims to strengthen the European Defence Technological and Industrial Base and deliver “defence industrial readiness” by 2035. EDIS frames higher national spending as raw input; the output must be a more responsive, resilient European industry capable of sustained support to Ukraine and credible deterrence at home.
Airbus reported about €69.2 bn in revenues for 2024 at group level, which anchors the band used above.
Sovereignty, Distributed Capability, and the Rise of Exquisite-at-Scale
These domains favour small & exquisite—software-defined payloads, sensors, autonomy—that can be fielded rapidly and iterated from combat feedback. They are increasingly framed in Brussels as the technological core of Europe’s drive for strategic autonomy and defence industrial readiness. “The winning firms will be those that combine exquisite differentiation with industrial discipline—and can deliver rate and quality at NATO tempo.” This idea aligns with assessments that Europe must combine quality engineering with industrial scale manufacturing to match NATO tempo and counter adversaries whose drone production outpaces the EU by orders of magnitude, stated by CSIS.
The 2025 EDF calls, outlined in Autonomy, Swarming, AI Mission Systems include dedicated clusters for autonomy, swarming, human-machine teaming and AI-enabled mission systems. NATO’s DIANA network expanded to 23 test centres and 11 accelerators, many focused on autonomous sensing, robotics, and resilient navigation. The NATO Innovation Fund (NIF) made autonomy one of its top investment themes.
Industrial Retooling: From Annual Plans to Weekly Sprints
Europe’s munitions deficit, laid bare since 2022, is being tackled with industrial policy in wartime cadence. The Act in Support of Ammunition Production (ASAP) allocated €500m across 31 projects. It targets powders, explosives, shells and missiles with a clear milestone of ~2 million 155mm shells/year by end-2025. This is a race to rate, not just capacity, backed by regulatory agility and supply-chain mapping.
EDIS effectively codifies this shift as a move toward “war-economy mode” for key segments of the European defence industry.
Beyond artillery, Europe is beginning to industrialise autonomy. Production lines for UGVs, autonomous ISR drones and AI-enabled command and control (C2) systems are emerging in Poland, the Baltics, France and the Nordics. SAFE loans increasingly support autonomy-related tooling, testing and certification pipelines.
The Hybrid Reality: Localising U.S. Primes Under ITAR Guardrails
Will we see more European localisation for U.S. next gen primes? Yes, selectively. Sustainment, training and certain components are migrating into Europe. Poland’s $1.85bn F-35 sustainment package is emblematic, coupled with proposals to add Polish suppliers to the F-35 global supply chain alongside Cameri’s MRO in Italy and the UK/Nordic industrial footprint. Several U.S. next‑generation autonomous and autonomy‑enabled programmes are also establishing or scoping European manufacturing nodes — including UK‑based assembly and testing for General Atomics’ MQ‑9B Protector; Anduril’s autonomous ISR, counter‑UAS and USV production in the UK and Denmark, reinforced by its Latvian expansion through the acquisition of Raidla Robotics; Teledyne FLIR’s European presence via its acquisition of Latvia’s UAV Factory (now Edge Autonomy); Lockheed Martin’s growth in autonomy‑enabled mission‑system and counter‑UAS work in Poland and the UK; and AeroVironment’s expanding European footprint through Puma, JUMP 20 and Switchblade sustainment and localisation pathways.
But ITAR/EAR guardrails will keep crown jewel intellectual property (IP) and classified software under U.S. control. The European SMEs that thrive here are those that are export ready: secure digital threads, requirements traceability, clean licensing pipelines and disciplined data governance. In short, localisation will grow, but within a hybrid supply chain model that embeds European rate and resilience without compromising U.S. tech controls.
Flagships at the Crossroads: When Big Stalls, Exquisite Moves First
Europe’s grand flagships, Future Combat Air System (FCAS) in the air and Main Ground Combat System (MGCS) on land, remain strategic anchors. But governance frictions and extended timelines sharpen the case for exquisite increments now.
FCAS endured disputes over workshare and leadership in 2025, with policymakers floating an interim emphasis on combat cloud and remote carriers, while the New Generation Fighter timeline drifted right. France’s “Plan B” Rafale F5 with sovereign AI and a stealth Unmanned Combat Aerial Vehicle (UCAV) wingman, is a pragmatic path to deliver Manned-Unmanned Teaming (MUM-T) effects in the early 2030s without waiting for full FCAS resolution.
In practice, this makes autonomy, through UCAVs, loyal wingmen and combat-cloud enablers, the most realistic near-term expression of European airpower modernisation.
MGCS advanced structurally with the Project Company GmbH formed in Cologne by KNDS, Rheinmetall, and Thales. Yet Initial Operating Capability (IOC) is now 2040–45, pushing armies toward active protection upgrades to keep legacy armour survivable, attritable UGV/UAS adjuncts to extend reach and mass and digitised fire control systems that lift the effectiveness of existing platforms. These near‑term bridges are becoming essential as flagship programmes make progress to ensure forces can maintain relevance while waiting for next‑generation systems to mature.
Regional Dynamics: Where Exquisite-at-Scale Wins First
Eastern and Nordic Europe will be early adopters. Poland, NATO’s highest relative spender at ~4.5% of GDP in 2025, devotes over half of its budget to equipment and is building doctrine and industrial pipelines that blend attritable UAS, counter-UAS, ISR and software-defined radios with big programmes. Poland is also Europe’s fastest‑growing UAV manufacturer, with domestic firms scaling reconnaissance and loitering systems at a pace unmatched elsewhere on the continent.
The UK, France and Germany remain Europe’s industrial anchors, with the UK leading in complex air and autonomy integration, France dominating fast‑jet, rotorcraft and EW ecosystems, and Germany now the continent’s largest OEM for UAS and high‑rate munitions production. Their scale sets the baseline that smaller states build upon.
The Baltic states have also rapidly become Europe’s frontline innovators in autonomous ground systems. In 2025, a European consortium led by Estonia launched the IMUGS-2 programme to develop interoperable unmanned ground systems with modular payloads, common control architectures and cross-border operability standards. The project positions the Baltics as a proving ground for autonomous logistics, reconnaissance and perimeter-defence UGVs; capabilities aligned with NATO’s push for distributed, attritable and software-defined systems.
Southern & Western Europe retain depth in aerospace, space, rotorcraft, and munitions; Benelux/Nordics punch above their weight in electronics, cyber, and undersea systems.
The New Logic of Scale: Standardise Mass, Personalise Effects
Standardise where scale delivers advantage: munitions, propellants, air‑defence components, depots and mobility corridors. Use EU‑level instruments such as the Act in Support of Ammunition Production (ASAP), the European Defence Industrial Programme (EDIP) and the European Defence Industry Reinforcement through Common Procurement Act (EDIRPA). One EU, many factories, one standard.
Personalise where agility drives effect: autonomy, electronic‑warfare payloads, ISR fusion tools, mission software, counter‑UAS kits and MUM‑T adapters. Here, small and medium‑sized enterprises iterate rapidly against battlefield feedback, while primes provide the integration, validation and certification pathways. In the EDIS framing, this is the space where Europe’s more agile firms are expected to contribute most to strategic autonomy.
Fuse both through a combat cloud. Secure, resilient, multidomain kill chains allow small sensors and effectors to amplify the lethality and survivability of larger platforms.
The Decisive Decade: A Playbook for European Indigenous Disruptors (2025–2028)
Europe is entering a decisive decade. With major programmes drifting toward a 2040–45 initial operating capability (IOC) window and the United States increasingly focused on other theatres, Europe must build a defence industrial base that is resilient, future-proofed and capable of delivering credible deterrence at continental scale. That requires a dual approach: scaling what must be standardised and accelerating what must be agile. Autonomy is the space where fast‑tracked technology can deliver meaningful battlefield advantage quickly, often at lower cost than ‘mega‑programmes’ that take decades to field and lack the flexibility to iterate at operational tempo.
1) Pick lanes where speed beats scale.
Prioritise domains with rapid cycles and strong EDF/PESCO (Permanent Structured Cooperation framework for defense within the EU) alignment: drones and counter-UAS, ISR/C2 software, EW payloads, energetics and lightweight propulsion. Build export-ready compliance from the outset with ITAR/EAR discipline, secured computer aided design (CAD) vaults and requirements traceability. Agility is the differentiator. Compliance is the enabler.
2) Design for the combat cloud.
Assume integration from day one. Open architectures, secure data links, AI decision aids and human-on-the-loop ethics are now baseline. Treat Rafale F5/MUM-T and FCAS subsystems as early integration testbeds. If a system cannot plug into a connected kill chain, it will not scale.
3) Marry exquisite with mass.
Partner on high-rate lines for shell components and air-defence subsystems while adding differentiators such as smart fuzes, seekers and EW software. Use ASAP and EDF co-funding to de-risk tooling, automation and early hiring. Europe needs exquisite effects, but only if they can be produced at meaningful volume.
4) Exploit localisation windows, without naïveté.
F-35 sustainment, training centres and components offer real entry points. Crown-jewel technologies do not. Position yourself as a compliance asset. In a tightening export-control environment, disciplined ITAR practice becomes a competitive advantage.
5) Build cross-border delivery muscle.
Leverage Military Mobility corridors and the Cyber Ranges Federation to shorten deployment timelines and strengthen multinational training. Interoperability is not just a requirement. It is a market advantage.
Exquisite at Scale: Europe’s Test for the 2025–2035 Window
Europe is rearming, but how it rearms will determine whether it can deter effectively in a world where allied attention is stretched across multiple regions. With major programmes drifting toward a 2040–45 IOC window, Europe must build a defence industrial base that is resilient, future‑proofed and capable of delivering credible deterrence at continental scale. That requires a dual approach: scaling what must be standardised and accelerating what must be agile. Autonomy is the space where fast‑tracked technology can deliver meaningful battlefield advantage quickly, often at lower cost than mega‑programmes that take decades to field and lack the flexibility to iterate at operational tempo.
The battlefield has shown that exquisite at scale, small, agile, connected systems fielded in large numbers, delivers more near‑term overmatch than waiting for perfect, singular platforms. The decisive window from 2025 to 2035 will be shaped by autonomy and teaming, ISR/C2 that collapses kill chains, counter‑UAS and EW that protect manoeuvre, resilient communications that survive jamming and munition mass that keeps depth on the shelf.
For Europe, the challenge is not only to spend more, but to convert that spending into resilience and readiness. The real test is whether EDIS can turn intent into capacity, fielding autonomous systems, high‑rate munitions production and combat‑cloud infrastructure fast enough to matter. Autonomy is the space where fast‑tracked technology can deliver meaningful battlefield advantage quickly, often at lower cost than mega‑programmes that take decades to field and lack the flexibility to iterate at operational tempo.
If Europe succeeds, autonomy becomes the lever that transforms today’s fragmented budgets and factories into tomorrow’s coherent deterrent posture. If it fails, no amount of long‑term ambition will compensate for shortfalls in the decisive decade ahead.