Canada’s Defence Industry: Why the Next Decade Belongs to Cross-Border Operators
Canadian defence companies have spent much of the past decade waiting. Waiting for procurement cycles to restart. Waiting for contract awards that often arrive years behind schedule. Waiting for a domestic market that, at roughly C$40 billion in annual defence spending, can only support a limited number of scaled players. For many firms, growth has been defined more by patience than momentum.
That period of waiting is ending. Between 2024 and 2030, NATO allies are projected to increase defence budgets by more than US$400 billion. The United Kingdom has committed to raising defence spending to 2.5% of GDP, translating to approximately £90 billion annually by 2030, up from £55 billion in 2023. Germany has announced a €100 billion rearmament fund, while Poland is on track to become Europe’s largest defence spender on a GDP basis. These commitments are being embedded into multi-year national strategies and procurement plans, reshaping the global defence landscape.
For Canadian defence firms, this represents more than an export opportunity. It reflects a structural shift in how allied nations procure, partner, and prioritize industrial capacity. Defence readiness is increasingly viewed through an allied lens, emphasizing resilience, interoperability, and depth of supply chains. Companies that position themselves within this framework will help define the next generation of the sector. Those that do not risk being compressed between global prime contractors and a slow-growing domestic base.
The constraint facing Canadian defence companies is not capability, but concentration. Most firms employ relatively small teams and derive a majority of their revenue from a single program or customer. This level of concentration leads to familiar challenges: extended revenue gaps between contracts, unpredictable working capital requirements, and difficulty maintaining engineering teams through uneven funding cycles. The result is a sector with deep technical expertise but limited ability to scale or absorb volatility.
Canada nonetheless produces advanced and globally competitive defence technologies. These include aerospace and simulation systems, autonomous navigation and vehicle technologies, cybersecurity and secure communications solutions, and AI-enabled sensing platforms. These are sophisticated subsystems designed to integrate into complex allied architectures. The issue is not technical relevance, but consistent access to programs and sufficient demand density to support sustained growth.
As allied defence spending accelerates, market selection becomes critical. The United States remains the world’s largest defence market, but access is constrained by regulatory restrictions, labour requirements, and entrenched incumbents. Many European markets, while expanding, remain fragmented by language, regulation, and industrial policy. For Canadian firms seeking practical entry into allied programs, not all markets offer the same balance of accessibility and scale.
The United Kingdom stands apart. As NATO’s second-largest defence spender in Europe, the UK maintains close procurement alignment with both the United States and European allies. More importantly, UK defence policy has shifted decisively toward collaboration. The 2023 Integrated Review emphasized international teaming, co-development, and supply-chain resilience rather than purely domestic sourcing. This approach is already evident in major programs such as next-generation air platforms, naval programs, and defence-focused AI initiatives that prioritize allied industrial participation.
For Canadian defence firms, particularly those operating in niche or enabling technologies, the UK represents more than an export destination. A UK presence can serve as a platform for broader engagement across Europe and the Five Eyes community, providing regulatory advantages, procurement access, and proximity to decision-makers that are difficult to replicate from Canada alone.
In practice, international expansion in defence tends to follow a limited number of successful paths. Some firms pursue partnered entry through joint ventures or long-term teaming agreements with UK primes or systems integrators. Others opt for targeted acquisitions that provide immediate access to certifications, contracts, and customer relationships. A third group expands on a program-led basis, establishing a local presence tied to secured or high-probability contracts. Each path carries different trade-offs in capital intensity, execution risk, and governance complexity.
What these approaches share is a common dependence on capital aligned with the realities of defence procurement. Defence programs operate on long timelines, involve uneven cash flows, and are susceptible to delays beyond management’s control. Traditional bank financing often fails to reflect future contract probability, while many equity investors seek return profiles misaligned with defence economics. As a result, capital structure frequently becomes the limiting factor in international expansion.
The opportunity ahead is both tangible and durable. Allied defence budgets are committed well beyond 2030, and capability gaps in areas such as autonomous systems, electronic warfare, cyber defence, and artificial intelligence align closely with Canadian technical strengths. At the same time, supply-chain risk and over-reliance on non-allied manufacturing have elevated sovereign and allied industrial capacity to a strategic priority.
The Canadian defence firms that succeed in this environment will be those that think in allied rather than purely national terms, build program density through deliberate partnerships, structure capital to match procurement timelines, and establish international presence early enough to develop durable relationships. Defence is not a market where momentum is built through pitchbooks. It is built through credibility, repetition, and delivery.
Canadian defence companies enter this period with strong technical reputations and proven engineering talent. What they require now is not additional capability, but the structure, partnerships, and capital discipline to deploy that capability at scale. Those that act decisively will not simply export more product. They will become embedded participants in the allied defence ecosystem, positioned to define the sector’s next decade of growth.
At Abingdon Group, we work with defence and dual-use companies as they evaluate cross-border growth, capital strategy, and partnership opportunities within allied markets. As procurement models evolve and international collaboration becomes central to defence readiness, thoughtful structure and disciplined execution will increasingly separate opportunity from outcome.
The waiting is over. The question is who is prepared to move.