Europe steps up defence innovation with €1 billion investment

Amid escalating geopolitical challenges, the European Union has ramped up its defence efforts, allocating €1.065 billion to collaborative research (€370.6 million) and development (€695.1 million) projects under the 2025 European Defence Fund (EDF). The initiative – structured around 33 topics within seven thematic calls, two non-thematic calls, and two specific grant agreements supporting the Alliance for defence medical countermeasures – aims to promote cooperation between companies, including SMEs and research actors throughout the Union, boost defence capability development through investments, and help EU companies develop cutting-edge and interoperable defence technologies and equipment. The calls will close on October 16th, 2025.

This year’s programme, recently adopted by the European Commission, supports projects ranging from land and air combat to energy resilience and environmental transition. Digital technologies, including cybersecurity and the use of artificial intelligence to boost different military capabilities, are widely present in the work programme, in line with the growing importance of protecting critical infrastructure and military networks from digital threats.

Margherita Volpe, Defence Knowledge Area leader at Zabala Innovation, highlights the significance of this investment: “EDF 2025 work programme mirrors the emerging challenges of our time, and has a clear focus on boosting EU-based innovation and participation of non-traditional players in the defence ecosystem”.

Supporting SMEs and fostering innovation

The programme also introduces targeted measures to support SMEs and mid-cap companies through the EU Defence Innovation Scheme (EUDIS). This mechanism provides grants and services to startups, SMEs, and research organisations, helping them overcome market entry barriers and bring pioneering ideas to the defence sector.

“Supporting SMEs is crucial to fostering innovation and ensuring that the most advanced solutions reach the European defence market,” explains Filippo Giacinti, a security expert and consultant at Zabala Innovation. This approach seeks to reduce investment fragmentation in defence technologies and capabilities, strengthen industrial cooperation, and promote interoperability among member states.

EDF 2025 also places strong emphasis on artificial intelligence, launching a technology challenge in this field. AI’s integration into defence systems promises to enhance efficiency and responsiveness to emerging threats. “Artificial intelligence has the potential to transform military operations, from logistics to real-time decision-making,” says Volpe.

An unprecedented modernisation effort

The modernisation of Europe’s military capabilities is another key pillar of the programme. Between 2021 and 2024, total defence spending by EU member states increased by over 30%, reaching approximately €326 billion last year – around 1.9% of the EU-27’s GDP, according to the European Council. Experts predict that this expenditure will continue to rise in the coming years.

Air and missile defence cooperation has also gained momentum, with 18 member states signing a letter of intent to strengthen collaboration in this domain. The objective is to share costs and avoid duplication in the development of common defence systems, reinforcing Europe’s capabilities in this strategic sector.

EDF 2025 also addresses the need for energy resilience and environmental transition in the defence sector. According to Giacinti, “sustainability and energy efficiency are now key considerations in the development of defence capabilities, ensuring that our armed forces are both effective and environmentally responsible.”

Furthermore, the programme includes calls for proposals that encourage synergies between civil and defence sectors in areas such as space, energy resilience, land combat, and cybersecurity. These initiatives aim to leverage dual-use technologies that can benefit both civil society and military applications.

Innovation and international collaboration

A notable addition to EDF 2025 is the participation of Ukrainian entities, which will now be eligible for acceleration support. The programme will also fund the second EUDIS Defence Hackathon, set to take place from 9 to 11 May 2025 across eight EU locations, with the goal of developing solutions for Ukraine and similar operational contexts. This initiative seeks to bring together innovators, investors, and defence end-users to collaborate on practical and effective solutions.

Since the EDF Regulation came into force in May 2021, the European Commission has committed €5.4 billion to defence R&D, positioning itself as one of the leading investors in European defence innovation. With a total budget of €8 billion for the 2021-2027 period, EDF is structured around two main pillars: funding collaborative defence research to address emerging security threats and co-financing capability development projects to enhance the EU’s preparedness for crisis scenarios.

Volpe stresses that EDF’s success will depend on collaboration between industrial, academic, and governmental stakeholders: “It is essential that businesses, research centres, and administrations work together to ensure that Europe develops sovereign and technologically advanced defence capabilities.”

Giacinti, for his part, underscores the importance of long-term planning: “Defence is not a sector where improvisation is an option; it requires sustained investment and a clear strategy to meet future challenges.”