The UK allotted £61.4B to defence tech funding in 2025, sustaining one in every of Europe’s largest defence budgets with a concentrate on naval and air upgrades, cyber capabilities and nuclear deterrence.
A brand new report by Tracxn titled “European Defence Tech Report 2025: Is Europe’s Defence Tech Coming into its Most Compelling Part for Traders?” reveals that the spending equates to 2.3% of the UK’s GDP and is topped in Europe solely by Germany, which spent £66.4B over the identical interval.
Greater than two-thirds of all fairness funding raised within the defence tech ecosystem is concentrated in its three most funded startups, which incorporates the UK’s ALL.SPACE at £151m.
The report additionally discovered that the highest three funded cities are Munich in Germany with £1.5B fairness funding, adopted by Studying within the UK with £163m, and Helsinki in Finland with £112m. Collectively, they characterize greater than 80% of complete fairness funding raised by the ecosystem.
The trade noticed Tekever and Quantum Programs attain unicorn standing this 12 months, with the previous having a UK manufacturing operation alongside its Portugal base.
Wanting on the state of the European defence tech sector as a complete, round 384 startups are based within the ecosystem, of which 32% have emerged over the past 10 years. The all-time fairness funding has surpassed £2.25B throughout over 130 rounds, and annual fairness inflows have jumped from £1.5m in 2016 to £826m in 2025, reflecting sturdy progress over the previous decade.
A complete of 119 VCs have invested, with Mission A rising as probably the most energetic VC, taking part in 9 rounds. It continues to steer in 2025 YTD with 5 rounds, displacing the NATO Innovation Fund that led in 2024 with two rounds. Over the previous decade, first-time VCs outnumbered or matched current traders in 9 of those years.
European defence tech has seen 27 acquisitions and 15 IPOs over the previous decade, with acquisitions specializing in strengthening surveillance and digital warfare capabilities, whereas IPOs intention to speed up international enlargement and R&D investments.
Earlier this month, the Division for Science, Innovation and Know-how (DSIT) launched a cyber runway scheme in partnership with Plexal to use SMEs to bolster the digital defence of UK crucial nationwide infrastructure (CNI).
