Rising defence spending in Europe is set to give a clear boost to the civil engineering market over the next decade. As countries allocate more of defence-related and defence-supporting expenditure, a growing share will be directed to transport, logistics, energy and military-mobility infrastructure. Even civilian projects may be re-prioritised or specified to meet security and resilience requirements, which supports steady infrastructure activity across Europe. For the construction sector this means that, compared with weaker residential and non-residential building, civil engineering remains the strongest segment in EUROCONSTRUCT’s outlook, backed at the same time by defence needs, production investments and EU-level initiatives.
Russia’s war in Ukraine and the United States’ call for European countries to take greater responsibility for their own defence have brought Europe both new requirements and new opportunities. Europe’s rising focus on security will lead to higher defence expenditure and, through that, to the construction of defence-related infrastructure and the strengthening of the defence industry.
According to NATO’s preliminary estimate, member states spent a total of about €1,336 billion on defence in 2024, of which EU countries accounted for €343 billion. NATO’s guideline to increase defence expenditure to 5% of GDP by 2035 is also significant for Europe’s construction sector. Of this, 1.5% would be allocated to defence-supporting expenditure and 3.5% to core defence expenditure. That 1.5% alone could provide a major boost to Europe’s civil engineering investment, since in the NATO countries in Europe it would mean more than €200 billion annually. It is not yet fully clear what will be counted within this defence-supporting 1.5%, nor what share of it will be assigned to civil engineering investments. The timing is also open: NATO’s spending framework looks ten years ahead to 2035.
Public discussion on the content of this 1.5% has mentioned, among other things, cybersecurity, security of supply, medical services, support for the defence industry, and the inclusion of measures to improve military mobility. Many current infrastructure projects are expected to fit under this spending framework. The public share of Europe’s nearly €300 billion in annual transport infrastructure construction already covers a large part of what is required for the 1.5% framework, but additional efforts and investments will certainly be made.
Even if many primarily civilian public infrastructure investments can be counted as such towards NATO’s 1.5% framework, the impact will likely be seen in how civil engineering projects are prioritised and scheduled. Adding the perspective of military mobility and hybrid threats to road, rail, airport, port, telecom, and energy investments can also affect the investments themselves and how they are carried out. Many countries are investing in airports, road network capacity and bridges. In Slovakia, for example, a major refurbishment of the Sliač air base has been planned for new fighter aircraft. The European Union is encouraging and supporting member states to increase defence spending through, for example, the EU Defence Fund and the ReArm Europe plan, which further increases the incentive for European countries to grow their defence-related and defence-supporting expenditure.
Germany approved a major investment package in spring 2025, in which infrastructure investments play a significant role alongside defence. The government’s plan is to establish a €500 billion infrastructure and investment fund. The constitution will also be amended to allow more borrowing for defence expenditure. Germany’s example is expected to encourage smaller European countries to take similar decisions, which would in turn increase public infrastructure (civil engineering) investment across Europe in the coming years. The German programme has also faced criticism that is relevant in other European countries as well. Large additional, debt-financed expenditures will weaken public finances and may increase risk premia and government borrowing costs and make it harder to stay within fiscal policy targets. Additional spending may also push up input prices, which would then dampen the real growth effect.
NATO membership will increase defence investments also in the new member states Finland and Sweden, even though defence expenditure in both countries has already been high compared to many others. In Finland, a significant share of the additional investment will be channelled to defence, but because of the long land border with Russia, there will also be substantial investment in defence infrastructure. In Sweden, the new long-term investment programme is the largest in the country’s history and focuses on improving transport links and aligning security priorities with those of other NATO countries.
According to statistics published by NATO in August, all member countries will reach the 2% target this year, but they remain far from the new, higher defence-spending goal. The earlier 2% of GDP target was set in 2014, and 2025 appears to be the first year in which it will be achieved.
The outlook for civil engineering in Europe currently looks particularly bright. In addition to growing defence expenditure, the sector will benefit from increasing industrial and production-related investments, which typically require more infrastructure as well. In EUROCONSTRUCT’s forecasts, the prospects for civil engineering in the coming years have already been more positive than for residential and non-residential building.
Once NATO’s, the EU’s and the member states’ new targets and guidelines are translated into concrete investment decisions, Europe is likely to see the strongest civil engineering investment boom since the final decades of the 20th century.
