Private investors must pile cash into defence to fill public funding gap, executives say

• European defence stocks are up only 1.3% in 2026 compared to 8% gains for the broader STOXX 600 index, reflecting cooled investor sentiment and a 'reckoning' in valuations
• ING Bank has increased its defence funding team to about 50 bankers from 'very few' five years ago, while attendance of finance executives at Farnborough jumped threefold to over 600
• Investment bottlenecks persist in the supply chain due to complex procurement processes and lack of government clarity, despite recognition that private capital mobilization is essential

Summary: Private Capital Needed to Bridge European Defence Funding Gap

European defence companies require substantial private investment to compensate for insufficient public funding, according to senior finance executives speaking at the Farnborough Airshow on July 20, 2026.

Key Points

Funding Requirements:

• Cathal Deasy, Barclays' global co-head of investment banking, emphasized that "public spending will not be enough" and private capital must be mobilized at scale
• Governments need to provide faster action and greater clarity to facilitate investment

Market Activity:

• Finance attendance at Farnborough surged threefold to over 600 delegates compared to 2025, including representatives from Goldman Sachs, JPMorgan, and Qatar's sovereign wealth fund
• ING expanded its defence-focused banking team to approximately 50 employees, up from "very few" five years ago

Market Performance:

• European aerospace and defence stock index gained only 1.3% year-to-date in 2026, significantly underperforming the broader STOXX 600's 8% gain
• Defence valuations experienced a "reckoning" over the past year but have since normalized, according to a U.S. private equity executive
• Franco-German defence group postponed its stock market listing this month due to unfavorable market conditions

Investment Challenges:

• Complex procurement processes and regulatory bottlenecks continue to discourage investment, particularly for smaller defence contractors
• Apollo's Ephraim Rudman highlighted difficulty deploying capital into the supply chain as a key bottleneck

The growing interest from banks and investors reflects efforts to capitalize on increased defence spending driven by heightened geopolitical tensions, though recent market sentiment has cooled.