This paper examines the position of SMEs in the European defence sector and reviews existing EU initiatives aimed at bridging the gap between their limited capacity and their structural importance.
Europe is assembling the contours of a European single market for defence (ESMD), but small and medium-sized enterprises (SMEs) remain underused despite being critical engines of innovation, resilience, and competition. This paper examines the position of SMEs in the European defence sector and reviews existing EU initiatives aimed at bridging the gap between their limited capacity and their structural importance. A competitive ESMD must be built on two foundations: open design authority and fair market contestability. To achieve this, the paper calls for reforms that open modular system architectures to smaller players, ensure fair co-ownership of intellectual property, and restructure contracts to broaden participation. Complementary measures on finance, payment discipline, and licence portability would further lower entry barriers and enhance interoperability across Europe’s defence base. Only by opening markets and promoting vigorous competition that leverages the continent’s full innovative potential can the European defence market finally become globally competitive.