Marion Tardif is a student at the College of Europe, Mario Soares Promotion. Her interests in European defence related topics have led her to explore the extent to which Brexit can result in a transformation
of the European defence industry sector. In this article, it emerges that the permanence of the structural weakness of the sector prevails, nevertheless, paths for substantial transformation are also highlighted.
The defence industry in Europe, linked to the Common Security and Defence Policy, is governed by the legal framework of industrial policy but limited by Member States’ sovereignty. The defence market is a
key sector for the EU. It represented an annual turnover of €97.3 billion and directly or indirectly employed 1.7 million people in 2014. This strategic sector is mainly driven by the United Kingdom,
France, and Germany. These Member States are signatories of the EU’s most far-reaching cooperation agreements, namely the “Letter of Intent” (LoI) or the Organisation for Joint Armament Cooperation
(OCCAR), and have the largest defence budgets despite an overall decline of defence spending in Europe. Considering that the UK was a key player in the past, Brexit raises questions about the future of
industrial defence policy in Europe. Since the United Kingdom did not wish to continue its cooperation on
foreign, security and defence policy, it has left Europe’s industrial defence sector in a state of uncertainty. At the same time, this vagueness has provided the Union with an opportunity to strengthen its position and for Franco-German cooperation to become a key pillar of the industrial defence policy in Europe. However, despite these opportunities, Brexit will not solve the structural problems of the European defence industry. Addressing them will require a lot of political will and a more ambitious coordination among member states. The United Kingdom’s departure has destabilised the defence industry in Europe. Indeed, the country was involved in many projects and the defence industry was boosted by British companies. Brexit also represents a loss of a quarter of the common defence budget. However, despite its financial commitments, the United Kingdom was also a brake on the development of the Common Security and Defence Policy and strategic autonomy. In fact, the UK had in the past repeatedly objected to projects that would allow the EU to gain autonomy from NATO. This means that Brexit creates opportunities for new
political ambitions and can potentially motivate the EU to reinforce the development of its own defence
structures and capabilities. For this purpose, the EU could build on the bilateral Franco-German cooperation, which is a historic example of European integration[1]. Since 2016, both countries have
become increasingly aware of the need to develop European defence. They have embarked together on
the realisation of key projects within the defence industry sector, such as the fighter aircraft of the
future or the Eurodrone. The political and the symbolic objective of these industrial cooperation
projects is to serve as the basis for a more legitimate and effective Common Security and Defence Policy.
Moreover, they benefit from the financial support of a new European Fund, the European Defence Fund,
which allocates a budget of eight billion euros to the sector.
Nevertheless, the defence industry remains a fragile sector, which faces a number of structural problems.
In Europe, it is a sector with an uneven concentration of firms and strong interdependencies. The LoI signatory countries (United Kingdom, France, Germany, Spain, Italy, and Sweden) represent 80% of
industrial capacity and 95% of the European global research and development effort. At the same time,
branches of the industrial defence sector are unequal, with aeronautics weighing more than naval and land forces together in terms of investments and markets. Although the aeronautics’ sector’s network is better structured than the naval and land sectors, it remains a dispersed and intra-competitive market.
Internationally, the market is dominated by the United States and the European market structure is
not sufficiently consolidated to compete at the same level. Indeed, among European companies there are
no less than five platform manufacturers (EADS, British Aerospace, Finmeccanica, Dassault, SAAB) and
six systems manufacturers (Thalès, Safran, Smith Aerospace, Cogham, Ultra Electronics and Indra
Sistemas). Competing companies further divide a market which is already defined by competing
national forces. This situation is a major obstacle to the management of joint projects and the
standardisation of norms and methods, which is well illustrated by the production of the A400M. Only the
helicopter and missile field have been able to overcome these obstacles[2].
On the other hand, the naval and land sector faces much more national and historic divisions leading to
dispersed capabilities. This is further aggravated by the lack of common standardisation and the permanence of specific requirements by national armies. The current structure of the defence industry
market fosters product differentiation, the coexistence of similar programmes and the
commercial and industrial penetration of the European Union by its foreign competitors. Moreover, due to the insufficient size and unstable nature of the European market the European armaments industry is a sector that cannot survive without exports. Besides these problems, the industry also suffers from a low research and evelopment investment. Companies, which do not perform well in the market, are not encouraged to invest and are at the same time faced with the disengagement of European states, resulting in a lack of financial resources for the sector[3].
The European defence industry would therefore have greater legitimacy and effectiveness if investment
policy was reformed at the European level to optimise spending. Additionally, a global restructuring process would reduce overcapacities and consolidate industrial production. At the supranational level, in an effort to achieve industrial homogenisation the European Defence Agency could step in to regulate
the market, which is largely subject to private companies’ strategies. Furthermore, a clarification of
the roles assigned to each party in the sector would make it possible to increase the efficiency of the
Ultimately, Brexit may lead to a strengthened Franco-German cooperation based on new industrial projects
that would pave the way for a more ambitious Common Security and Defence Policy. How
ever, the sector’s structural problems remain to be solved, such as the internal division of the market, its small size which necessitates competitive exports and greater financial resources.
These structural problems could be solved by restructuring the market, increasing supranational prerogatives, and clarifying the roles of each parties. This requires a strong common political will.
[1] Delphine Deschaux-Dutard “La coopération militaire franco-allemande et la défense européenne après le Brexit” Presses de Sciences Po, Les Champs de Mars, n° 32 (2019) : 53-76
[2] Romuald Dupuy “L’industrie européenne de défense : changements institutionnels et stratégiques de compétition des firmes” De Boeck Supérieur, Innovations, n° 42 (2013) : 85-107
[3] Jacques Perget “L’Européanisation de l’industrie d’armement” L’Esprit du temps, Topique, n°107 (2009) : 225-235