Finance Executives Urge Private Capital to Bridge European Defense Funding Gap

Senior finance executives are calling for a significant influx of private capital into Europe's defense industry, arguing that government spending alone is insufficient to meet heightened geopolitical demands. Speaking at the Farnborough Airshow, industry leaders stressed that while the need is urgent, bottlenecks and complex processes are currently discouraging necessary private investment.

The Call for Private Capital

The core issue is a gap between military requirements and the capacity of cash-strapped governments to fund them. "Public spending will not be enough, and we do need to mobilise private capital at scale," said Cathal Deasy, global co-head of investment banking at Barclays. Deasy told delegates that national governments must act faster and provide greater clarity to attract these funds.

This call comes as the financial community shows increased interest in the sector. According to event organizers, a record 600+ finance delegates are attending the airshow this year, a threefold increase from 2025, with representatives from firms like Goldman Sachs, JPMorgan, and Qatar’s sovereign wealth fund.

Market Realities and Investor Sentiment

Despite the growing interest, recent market performance reflects a more cautious investor sentiment. After a strong rally, European defense stocks have cooled.

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• An index of European aerospace and defense stocks has gained just 1.3% since the start of 2026.
• This performance significantly lags the broader STOXX 600 index, which is up 8% over the same period.

This challenging environment was highlighted when the Franco-German defense group KNDS recently postponed its planned stock market listing, citing unfavorable conditions. Still, banks are expanding their focus on the sector. Amin Mansour, a vice chairman at ING, told Reuters the bank now has about 50 bankers working on defense deals, up from "very few" five years ago, as they "see an opportunity to jump in."

Overcoming Investment Hurdles

Executives identified several barriers preventing private capital from reaching the companies that need it most, particularly smaller contractors. Complex procurement processes and other structural issues create significant friction. “It’s getting the capital into the supply chain which is challenging and which does create bottlenecks," noted Ephraim Rudman, a partner at Apollo.

One executive from a major U.S. private equity firm, who spoke anonymously, said that defense company valuations had undergone a "reckoning" over the past year. However, they added that valuations have since normalized, making them more attractive and "investible."