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Defence spending

Canada's Defence Sector Lags Behind, but Investments in Industry are Expected to Soar

Strategic Insights

— 2 min read

As Canada's government begins to increase its defence spending, the country's tech industry is gearing up to take on the challenge, despite decades of underinvestment in the sector. With global defence tech growing faster than ever, Canada is seen as an early player in a market expected to see tens of billions of dollars in investments. Prime Minister Mark Carney has announced that Canada will meet NATO's 2-per-cent military expenditure target this fiscal year, and totals could reach over $60-billion for 2025-26.

Key Takeaways:

  • Canada's defence spending as a percentage of its GDP remains one of the lowest among NATO member countries, with a target to reach 2 per cent by 2025-26.
  • The country is expected to see a significant increase in defence spending, with totals potentially reaching over $60-billion for 2025-26.
  • Canada's government is prioritizing spending on Canadian defence companies, where possible, and is looking to diversify away from the country's reliance on U.S. military goods.
  • Private and public sector investors will likely focus on dual-use technologies, which can be used both commercially and for defence.
  • The federal government needs to build expertise and capacity in the defence industry by acquiring technologies from partners such as the European Union and investing in longer-term growth within Canada.
  • A overhaul of Canada's market structure is necessary to establish a viable market for defence tech, and the government must provide support to businesses transitioning to dual-use technologies.

Statistics:

  • Canada's defence spending as a percentage of its GDP is expected to reach 2 per cent by 2025-26.
  • Total defence spending could reach over $60-billion for 2025-26.
  • The defence tech industry is expected to see tens of billions of dollars in investments over the coming years.
  • 2 (per cent) - Canada's current defence spending target, set to rise to 5 per cent at the NATO meeting in The Hague.

Sources:

  • Prime Minister Mark Carney, announcement on defence spending, [The Globe and Mail, 2023]
  • Daniel Sax, founder and CEO at the Canadian Space Mining Corporation, panel discussion, [Icebreaker, 2023]
  • Mark Maybank, co-founder and managing partner at Maverix Private Equity, panel discussion, [Icebreaker, 2023]
  • Evan Solomon, Minister of AI and Digital Innovation, interview with The Globe and Mail, [The Globe and Mail, 2023]
  • Bogdan Frusina, founder of communications company Dejero, panel discussion, [Icebreaker, 2023]
  • Michael Smith, chief operating officer at the defence venture capital fund, One9, panel discussion, [Icebreaker, 2023]
  • Jacqueline Good, founder and CEO of defence and space company Magnestar Inc., panel discussion, [Icebreaker, 2023]
  • Kevin Reed, president and chief operations officer at the Defence, Security and Resilience Bank, panel discussion, [Icebreaker, 2023]

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