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Europe must increase its financial backing for the defence industry massively if it wants to spur collaboration and improve the competitiveness of the continent’s companies, according to the boss of Saab.
Micael Johansson, chief executive of the Swedish defence group, told the Financial Times that the European defence industrial strategy needed to be backed by a figure in the region of €100bn rather than the €1.5bn currently envisaged by the European Commission.
“What defines [consolidation] going forward is if the EU will be successful in negotiating a substantial European defence industrial strategy. If there is substantial money in that, that will drive collaborations such as joint ventures. It needs to be incentivised somehow,” he said.
European countries have greatly increased their military spending since Russia’s 2022 full-scale invasion of Ukraine.
Nato estimates that the European members of the defence alliance, which include non-EU countries such as Turkey, the UK and Norway, will spend $476bn this year, up 22 per cent on 2023.
Almost four-fifths of publicly announced defence purchases from EU countries in the year after the Russian invasion went to companies outside the bloc, with those in the US accounting for two-thirds of the total, according to research by Iris, the French institute for international and strategic affairs.
The European Defence Industrial Strategy, announced by commission president Ursula von der Leyen in March, is an attempt to correct this by encouraging countries to invest together with more local companies.
But after some commission officials floated figures of up to €100bn initially for the strategy, it was launched with just €1.5bn of backing.
Johansson said that consolidation in a sector renowned for its national champions and accusations of protectionism was “not top of my mind”.
But he added: “If countries come together and say we have the same requirements, we want to procure together, then the volumes would be so substantial that one company won’t be able to do it alone.”
Some European countries have co-operated on some high-profile defence projects such as the Eurofighter and a future advanced jet planned between the UK, Italy and Japan while Nordic nations are aiming to pool their F-35 and Saab Gripen fighters as part of a joint fleet.
Johansson called such integration of different systems from different companies “essential”.
Some European leaders have called on the continent to up its defence spending even more in anticipation of a possible return of Donald Trump to the US presidency.
But Saab’s chief executive said that Europe had “to step up, independently of the US administration” and understand the “paradigm shift” that had occurred.
Saab itself revealed this month that its orders almost tripled in the second quarter compared with a year earlier from its portfolio of fighter jets, surveillance aircraft, submarines and more.
Johansson said: “We are on a journey of many years to establish defence capacity, in Europe specifically. There is more coming. There is extremely high activity.”
