European Defence and SMEs’ Involvement: Innovation and New Technologies
On 20 May 2025, SME Europe together with Riho TERRAS, Member of the European Parliament; Chair of the EPP SME Defence Initiative; Vice-Chair of the Committee on Security and Defence (SEDE), organized a high-level working meeting titled “European Defence and SMEs’ Involvement: Innovation and New Technologies” in the SME Europe office in Brussels.
The roundtable saw the participation of distinguished experts including Guillaume DE LA BROSSE, Head of Unit for Defence Policy and Innovation at the European Commission, alongside policymakers, industry experts, businesses, and other stakeholders. The discussion focused on how small and medium-sized enterprises can more effectively contribute to the future of European defence through innovation, technological development, and strategic investment. The discussion was framed in the context of the European Commission’s White Paper for European Defence – Readiness 2030 and focused on how current and upcoming EU instruments can address existing challenges while supporting long-term capability building.
Riho Terras MEP opened the discussion by recalling the last gathering in Strasbourg in autumn 2024, when early drafts of the EU’s Defence White Paper were being prepared. Now that the White Paper for European Defence – Readiness 2030 has been released, Terras acknowledged its importance but noted that, while it addresses SMEs, it was in his view too broad and lacked specificity. He highlighted several points from the White Paper that concern SMEs: their explicit mention in the context of disruptive innovation, the support measures through targeted programs, cross-border cooperation criteria in the European Defence Fund (EDF), and financial incentives based on SME involvement. Despite a notable SME participation rate of 50% in EDF calls and a projected €840 million in funding, Terras emphasized that this figure is modest relative to the needs of the defence sector. He stressed ongoing challenges SMEs face – particularly in securing financing due to banks’ reluctance to support defence projects – and called on the Commission to provide concrete answers on how to improve access to funding and deepen SME integration in Europe’s defence landscape.
Guillaume de la Brosse, Head of Unit for Defence Policy and Innovation in the European Commission, outlined the urgency behind Europe’s defence revitalization, driven by the geopolitical threats posed by Russia and growing pressure from U.S. for Europe to take greater responsibility. De la Brosse emphasized the significance of the new European Commission setup, particularly the appointment of a dedicated Commissioner for Defence and Space. He elaborated on the recently released White Paper, designed to align Member States around the need for urgent, large-scale reinvestment in defence. He highlighted key financial instruments such as the flexibility of the Growth and Stability Pact and the SAFE (Security Action for Europe) initiative, which aims to inject €150 billion in defence loans. These mechanisms are intended to allow Member States to quickly place contracts and ramp up capabilities. De la Brosse stressed the dual focus on both the demand and supply sides, calling attention to the critical role of SMEs in scaling production, innovation, and filling supply chain gaps. He acknowledged existing bottlenecks – especially in financing SMEs – and welcomed changes in institutional policies (e.g., EIB’s loosening of restrictions) as steps toward improving access to capital. Additionally, other EU instruments like the European Innovation Council and cohesion funds are being mobilized to support defence. Lastly, he called for simplifying procurement regulations and emphasized that the Member States must now utilize the tools provided to ensure the defence ecosystem, including SMEs, is ready to deliver at speed and scale.
The event continued with discussion focused on the tangible steps required to boost SME contributions to European defence efforts. It was discussed that SMEs continue to face significant challenges in accessing finance, particularly for scaling high-tech solutions and dual-use technologies. There was a strong call for simplifying application procedures and reducing bureaucratic burdens within EU funding frameworks to ensure smaller businesses can participate more efficiently.
Talent acquisition was also identified as a critical issue. The shortage of highly skilled professionals in areas such as AI, quantum computing, and software engineering is limiting the capacity of many SMEs to expand or engage in high-value defence projects. Participants explored strategies to strengthen collaboration between the private sector and research institutions to build a more skilled and defence-ready workforce.
Furthermore, participants highlighted the importance of strengthening cross-border cooperation and improving synergies between national and EU-level initiatives. The need for greater alignment in defence procurement and certification standards was raised as a way to foster competitiveness and open up new opportunities for SMEs across the internal market.
One of the key points raised was the lack of military logistics infrastructure in Europe – especially depots for storing and distributing critical items like ammunition, protective gear, and uniforms. Without proper infrastructure, it’s difficult to move supplies quickly in times of crisis.
There was also broad recognition of the potential of dual-use technologies to act as accelerators for innovation. Creating environments that support commercial scalability while maintaining defence-grade standards was seen as a strategic priority.
The event concluded with a consensus on the importance of SMEs to the future of European defence. To reach the goals outlined in the White Paper on Readiness 2030, the European Union must build a more inclusive and innovation-friendly defence ecosystem. This includes making funding more accessible, strengthening talent pipelines, and reducing regulatory fragmentation.
