29th April 2025

The global defence landscape is undergoing a profound transformation, with Europe emerging as a major driver of unprecedented growth in military expenditure. According to the Stockholm International Peace Research Institute (SIPRI), military spending in Europe rose by 17 per cent in 2024 to reach US$693 billion — the highest level since the end of the Cold War. Germany, Poland, Sweden, the United Kingdom, and France all reported significant increases, as European nations responded to heightened security concerns and the ongoing war in Ukraine (SIPRI, 2025; EFE, 2025).

This dramatic rise creates real opportunities for Australian defence exporters. Europe’s demand for advanced capabilities — across land, sea, air, and cyber domains — is set to continue, offering openings for Australian technology, equipment, services, and support industries. However, the decision to enter these markets must be made with a clear and sober understanding of the complex regulatory landscape that governs defence trade in Europe. Export controls, import requirements, re-export obligations, and sovereignty implications vary substantially across European jurisdictions, and must be factored into market entry, supply chain structuring, and risk management from the outset.

Opportunities Driven by Unprecedented Spending

European military spending now accounts for 30 per cent of total NATO expenditure, with all NATO members increasing their defence budgets in 2024 (SIPRI, 2025). Germany, the continent’s largest spender, increased its military expenditure by 28 per cent to US$88.5 billion, becoming the fourth highest military spender globally. Poland’s defence budget rose by 31 per cent, while Sweden’s spending surged by 34 per cent in its first year of NATO membership. The United Kingdom and France also recorded meaningful increases, reinforcing their positions as global top-10 military spenders.

This surge in investment reflects a strategic pivot by European nations, responding not only to Russia’s ongoing aggression but also to concerns about future transatlantic defence dynamics. As SIPRI researchers have noted, the trend suggests that Europe has entered a sustained period of high and growing military expenditure. For Australian exporters, this environment presents opportunities in areas such as defence technology, sustainment services, cyber security, unmanned systems, and advanced manufacturing.

Trade Compliance: A Critical Factor in Market Entry

However, while the commercial opportunities are significant, navigating the regulatory environment will be complex. Exporters must have “eyes wide open” to the export control realities in each market and the flow-on implications for technology sovereignty, compliance obligations, and supply chain structure.

Across Europe, while there are similarities in export control regimes — most notably through the direct application of the EU Dual-Use Regulation (Regulation (EU) 2021/821) — there are also substantial differences. Each EU member state retains unilateral authority to impose additional export controls, maintain separate strategic goods lists, and operate distinct licensing systems. After Brexit, the United Kingdom retained aspects of EU export control laws but also developed its own systems, such as the SPIRE licensing platform and unique categories of licences (SIEL, OIEL, OGEL), each with different conditions for use.

Re-export rules add further complexity. For instance, under the UK Export Control Order 2008, re-exporting controlled goods or technology — even if exported under a UK licence — can trigger new licence requirements, especially where goods are destined for sanctioned countries or involve military applications.

The regulatory picture differs further in non-EU countries like Norway. Although aligned with EU export control standards, Norway requires exporters, including foreign businesses, to register locally and engage with its own licensing authority, the Norwegian Agency for Export Control and Sanctions (DEKSA), through the E-lisens portal. Germany, meanwhile, requires licences through BAFA under both EU and national law, with particular rules applying to military goods and sanctioned destinations.

Each country’s licensing body, permit structure, re-export conditions, and compliance expectations can differ sharply — with serious legal and commercial consequences if mishandled.

Managing Supply Chain Risks and Technology Sovereignty

The consequences of misunderstanding or underestimating European export control obligations extend beyond regulatory risk. They have direct implications for supply chain structuring, contractual arrangements, intellectual property rights, and long-term technology sovereignty. For example, exporting a subsystem to Germany or the UK without understanding re-export limitations could inadvertently “taint” Australian-developed technology, limiting future opportunities to re-sell, upgrade, or transfer the item elsewhere without foreign government approvals.

Moreover, decisions about whether to manufacture domestically or through a European partner must weigh not just cost and logistics, but also compliance risks, control of intellectual property, and long-term operational flexibility.

Consider…

• Does the equivalent of the ITAR “see-through” rule exist in the particular jurisdiction?
• Does the jurisdiction have deemed export rules?
• Are there export control rules for workforce considerations for dual and third country nationals?
• Is there preferential licensing for certain jurisdictions, i.e. AUKUS, or intra-Europe trade?
• Who is the regulator and do you need to register, is registration free?
• Are my overseas agents falling foul of brokering rules either in the Australian jurisdiction or an overseas jurisdiction?
• and, many more considerations?

The answer to these sorts of questions should inform your business strategy around supply chain structure, manufacturing locations, repair and service support etc.

Conclusion: Opportunity with Caution

In summary, the sustained surge in European military spending creates significant opportunities for Australian defence exporters. The environment is dynamic, well-resourced, and increasingly open to foreign technologies and partnerships. However, the complexity of European and UK export controls, re-export rules, and sovereign technology risks demands thorough due diligence before market entry.

Australian companies seeking to access this opportunity must incorporate trade compliance and export control assessments into their initial market selection and supply chain planning. Success will require not just great technology and competitive offerings, but also sophisticated regulatory navigation to protect long-term commercial and sovereign interests.

Sources

• Stockholm International Peace Research Institute (SIPRI), 2025, Unprecedented rise in global military expenditure as European and Middle East spending surges
• EFE Agency, 2025, Europe, Middle East drive ‘unprecedented’ global military spending
• POLITICO, 2025, Berlin takes lead in Europe’s rearmament as global defense spending soars

Author: Amy McDonnell – General Manager Security Trade & Industry