Private Capital Faces Hurdles in Plugging European Defence Funding Gap

Cathal Deasy, global co-head of investment banking at Barclays, warned delegates that public spending alone cannot meet current security demands. He urged national governments to accelerate procurement processes and provide greater clarity to attract institutional investors. While the prospect of a defence boom has drawn record numbers of bankers to Farnborough—including representatives from Goldman Sachs, JPMorgan, and Qatar’s sovereign wealth fund—the initial excitement has met a cooling reality.

Market enthusiasm has waned as the rally in European defence stocks slowed, with the aerospace and defence index rising only 1.3% since the start of 2026 compared to an 8% gain for the broader STOXX 600. This shift has already impacted corporate strategy, notably forcing the Franco-German group KNDS to pause its stock market listing. Executives from major private equity houses, including Apollo’s Ephraim Rudman, note that while valuations have normalized after a period of intense scrutiny, small-to-medium contractors remain largely cut off from capital due to complex procurement requirements. Despite these obstacles, some lenders are scaling up; ING now maintains a dedicated team of 50 bankers for defence funding, a significant expansion from the handful of specialists assigned to the sector just five years ago.