The Financial Situation of the Defence Technological and Industrial Base Since the Onset of the War in Ukraine

Rising defence spending, increasing at a faster pace since 2022, could trigger an increase in business activity. The rapid development of Defence Technological and Industrial Base (DTIB) businesses and the related benefits are however hampered by lingering supply and hiring difficulties. 

According to a study published in March 2025 carried out by France’s Economic Observatory for Defence and the French Treasury, the economic and financial situation of the DTIB was precarious prior to the Russian invasion of Ukraine. This paper supplements the study by analysing the situation up to 2024 and shows that since 2022 the sector’s economic and financial health has been steadily improving. However, long payment lead times and a high working capital requirement point to the need for significant cash flow. 

Since 2021, intermediate-sized enterprises (ISEs) and small and medium-sized enterprises (SMEs) in the DTIB have seen a sharp increase in their value added, profit margins and investment rates, which are more robust than for comparable non-DTIB companies. 

The equity of DTIB companies has risen, driven primarily by the increase in earnings. However, their equity levels are still proportionally lower than in the rest of the industrial sector, and the borrowing levels of DTIB companies continue to be more significant. 

This trend may continue with rising defence spending in France and Europe and an expansion of financing opportunities. The ongoing consultation between the defence industry and the financial sector, set up by the Defence Procurement and Technology Agency (DGA) and the French Treasury in 2025, has facilitated bank financing and helped raise equity funding in the DTIB.