For years European officials have talked a big game on defence. The European Union has made numerous proposals to boost the continent’s puny production of arms. Three years after Russia’s full-scale invasion of Ukraine, what do Europe’s arms makers have to show for themselves? The Economist has compiled data for Europe’s ten biggest defence firms, and looked across four lines of military output. There is more momentum than critics imagine, though gaps remain.
Take new factories and gear. Capital investment has surged by 64% since 2021, to $5.5bn among the firms for which data was available (see chart 1). Analysts expect it to reach $6.4bn by 2027. Order backlogs at Europe’s ten top firms have ballooned from $222bn in 2021 to $362bn in 2024 (see chart 2), while their combined headcount increased by nearly a quarter.
For a more detailed picture, look at four key categories: ammunition, air defences, heavy armour and long-range strike munitions. Start with the clearest success, ammunition. In February 2023 Europe’s production of 155mm shells, the mostly widely used calibre, was around 300,000 rounds a year. Today it is probably just shy of a million. Rheinmetall, a German company, churns out some 700,000 a year, up from just 70,000 in 2022, and expects to hit 1.1m by 2027. “We already produce more ammunition than the United States,” Armin Papperger, Rheinmetall’s boisterous CEO, crowed recently: US Army plants turned out perhaps 600,000 rounds last year.
Production is about to speed up even more. BAE Systems, Britain’s biggest defence contractor, will soon complete an eight-fold increase in 155mm-round production. Europe’s two main makers of gunpowder, Chemring Nobel and Eurenco, have roughly doubled capacity since the start of the war. Artillery-piece production has improved too. The French half of KNDS, a Franco-German company that makes the CAESAR howitzer, reckons it will be able to make 144 units a year by 2025, compared with just 24 before the war.
Complex products such as missiles and air-defence systems take more time. An air-defence battery requires a launcher with missiles, a radar system and a command module. Europe has upped its output of shorter-range systems. Diehl Defence, a German company which builds the IRIS-T SLM that Ukraine uses, produced between 400 and 500 interceptors in 2024. Hensoldt, which builds its radar, went from only two units in 2021 to an expected 18 of them this year.
But the continent does less well with longer-range air-defence systems. Most European countries rely on the American-made Patriot. Lockheed Martin, its manufacturer, has ramped up to 650 interceptors a year. But the European-made alternative, the Franco-Italian SAMP/T, was “developed in an era where time was not important”, concedes Eric Béranger, the head of MBDA, a pan-European missile maker. It is cutting delivery time for an interceptor from 42 months to a still sluggish 18 by 2026.
Making heavy armoured vehicles has also been slow. Europe has just one active production line for main battle tanks: the Leopard 2 line managed by the German half of KNDS. During the cold war it built 300 tanks a year. Today it does about 50. In February it took over a plant in Saxony from Alstom, a French train maker, to build tanks, but is yet to get big orders. The German government has dragged its feet, taking until July 2024 to order 105 new tanks for its brigade in Lithuania.
Europe’s most glaring deficiency lies in long-range strike weapons. Take Storm Shadow/SCALP and Taurus cruise missiles. France, Britain and Germany can make them, but only France has an active production line. Neither Britain nor Germany has placed new orders in over 20 years. Fabian Hoffmann of the University of Oslo estimates that France builds 50-100 of the missiles a year. By comparison, America’s Lockheed Martin makes 700 JASSM cruise missiles a year, and plans to go to 1,100. Russia builds an estimated 1,200 cruise missiles annually.
Industry insiders say the bottleneck is not so much manufacturing capacity as a dearth of big orders from governments. Some firms are “not challenged at all to [their] maximum capacity”, says Jan Pie of ASD, a Brussels-based trade association. The pan-European consortium behind the Eurofighter Typhoon made around 60 aircraft a year a decade ago. It builds just a dozen a year now, but could quickly surge: all the old manufacturing jigs remain in place, and countries like Portugal and Canada are souring on buying American F-35s.
“Ultimately this comes down to the political will to put through orders, rather than industrial problems,” argues Guntram Wolff of Bruegel, a think-tank in Brussels. He reckons Europe could massively ramp up production of critical systems in two years if enough orders were placed. An EU white paper presented to European leaders on March 19th encourages more joint purchases of arms to tap into economies of scale. Many countries still favour their own firms when buying kit. Consolidation would be a step in the right direction. ■
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