European defence investment is accelerating.
The UK has announced an additional £15 billion for its Defence Investment Plan. The European Union has adopted a €1.5 billion programme intended to strengthen the defence industrial base and increase production capacity.
The scale of the commitment matters. But the amount of money being spent is not the only question.
We also need to ask whether it is being spent at the right points in the system.
The underlying challenge is universal. Whether in Europe, North America or Asia-Pacific, increased spending only translates into military capability when it expands capacity at the points that actually constrain production.
Manufacturing systems are governed by constraints. The Theory of Constraints tells us that increasing capacity anywhere other than at the binding constraint does not increase overall output. Put simply, if one bottleneck is limiting production, increasing capacity elsewhere may create more activity without producing a corresponding increase in output.
This becomes even more important when utilisation is high. Queueing theory shows that waiting times do not rise evenly as a constrained resource approaches full utilisation. They can increase rapidly and disproportionately. Once critical resources approach capacity, relatively small increases in demand can create disproportionately large delays.
A defence supply chain that appears functional during normal demand can therefore become dangerously slow when requirements increase.
That is why capacity cannot simply mean more factories, more equipment or more contracts. It must mean identifying the specific processes, materials, suppliers, skills and qualification resources that limit the production of complete systems.
Magnetics is one example.
Electric propulsion and power systems depend on a fragmented chain of materials, specialist manufacturing processes, components and technical expertise. Expanding final assembly does little if access to critical magnetic materials or qualified components remains constrained.
The same principle applies throughout the defence industrial base.
If conflict escalated tomorrow, do governments know which suppliers would constrain production? Do they know the required volumes, realistic lead times and dependencies several tiers below the prime contractor?
From the conversations we have had, the picture does not appear sufficiently clear.
This is not simply a criticism of government. Mapping a complex industrial system is difficult. Requirements change, suppliers overlap across programmes, and many important dependencies sit inside smaller companies that are largely invisible from the top of the supply chain.
But that uncertainty is precisely why investment must become more targeted.
Traditional primes will remain important. They provide integration, assurance and the ability to manage major programmes. But they cannot be the only route through which capability, capital and innovation enter the market.
While primes remain critical programme integrators, rapidly evolving technologies often require contributions from a broader ecosystem of specialist suppliers capable of innovating and scaling quickly. Smaller and mid-sized companies often operate closer to the underlying technical constraints. They can introduce new manufacturing methods, redesign subsystems and respond across programmes without waiting for an entire platform architecture to change.
The priority should not be supporting smaller businesses simply because they are small. It should be identifying businesses that remove genuine constraints and can apply their capabilities across multiple programmes.
At ePropelled, we see this dynamic firsthand through our work across the uncrewed vehicle market. Our propulsion systems and ePConnect™ technology support a common control, power and propulsion architecture spanning aerial, ground and maritime systems. We believe this type of enabling infrastructure will become increasingly important as defence ministries seek to scale autonomous capability more rapidly and efficiently.
The multi-domain relevance of this unified architecture means investment in a single technology layer can support multiple platforms and programmes, creating capability that can be reused and extended rather than having to be recreated, programme after programme.
It creates capacity that can be reused, maximising return on investment and applying demand to the manufacturing supply chain that exposes further constraints to be dealt with.
In this week’s Finance Lens, I look at why the same spending shift is creating an investable industrial market—and why capital must follow the constraints rather than the largest contractors.
Europe does not need more defence activity; it needs investment that increases the output of the complete system.
Author Bio
Author: Henry Sullivan, Head of Finance, ePropelled
Oversees the company’s global finance, human resources and information technology functions. His role spans financial stewardship, operational governance and organisational strategy across ePropelled’s international footprint. With deep expertise in accounting and financial management, strong technology leadership and broad knowledge of international tax structures, Henry plays a central role in shaping the company’s long-term growth and efficiency. His strategic insight into emerging technologies, regulatory environments and supply chain dependencies provides a valuable perspective at the intersection of innovation, assurance and commercial execution.
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The Defence Budget Is Becoming an Industrial Policy