With the raising of the NATO norm and with it spending on defence, 41 billion euros will become available for the Dutch manufacturing industry over the next five years. To exploit this national potential, the Dutch defence manufacturing sector will have to at least triple its annual output. This is according to PwC's study 'Mobilising the Dutch defence industry'. This presents the sector with a huge opportunity and task.
Meeting NATO standard
To meet the NATO norm, where 3.5 per cent of GDP is spent on core defence spending, defence spending in the Netherlands will rise sharply: from 22 billion euros in 2025, to around 38 billion euros in 2030 and 59 billion euros in 2035. Cumulatively, this leads to defence investments of 178 billion euros between 2025 and 2030. 'This mainly sees to the equipment category, with 62 billion euros the largest item after personnel. This includes ships, lightly armoured vehicles and drones. Of this, potentially 41 billion euros will be available to the Dutch manufacturing industry,' said Bastiaan Oomens, who is a partner at PwC-Strategy& working for manufacturing companies.
In our research, we identified over three thousand Dutch manufacturing companies that could play a role in filling this huge upscaling need, especially in a role as a crucial supplier.Bastiaan Oomens, as a partner at PwC-Strategy& active for manufacturing companies
Tripling of output needed
The output of the defence manufacturing sector was equivalent to about EUR 3.5 billion in 2023. According to PwC's calculations, a threefold increase in output is needed to tap the national potential of 41 billion euros until 2030.
Professionalisation, expansion and optimisation
'This calls for professionalisation, expansion and optimisation among the companies already supplying defence. However, they cannot handle the demand alone. In the study, we identified more than three thousand Dutch manufacturing companies that can play a role in realising these huge investments. Thereby, any company with a specialised defence solution will soon be able to supply both domestic and foreign Original Equipment Manufacturers (OEMs).' According to Oomens, this offers great opportunities for the high-quality Dutch manufacturing industry and for the long-term earning power of the Netherlands.
Just as the defence ecosystem is really a world unto itself, the value chain of civilian manufacturing companies is also really uncharted territory for many people in defence. With our report and advisory work, we hope to open up those worlds for each other. That way, together, we enable effective investments that are of great importance for the bv Netherlands and for peace and security.Daniel de Jager, Client Lead Partner, Ministry of Defence, PwC Netherlands
Advanced materials
The analysis shows that Dutch companies are particularly strong in metalworking, advanced materials (such as composites and plastics) and sensor technology. At the same time, the Netherlands is still underrepresented in areas such as engine components and drive technology, radar and sonar systems and micro-electronics. 'Without targeted investments and strategic collaborations to develop these advanced capabilities, valuable opportunities at home and abroad will remain unexploited,' Oomens concludes.
SMEs
The 3,400 Dutch manufacturing companies with potentially relevant capabilities for the defence market consist mainly of SMEs in the North Brabant, South Holland and Gelderland regions. They are largely not yet active in the defence chain.
Alliances and regional initiatives as growth engine
A logical next step for these companies, according to Oomens, is to enter into partnerships. 'We are good at that in the Netherlands, take the collaboration initiatives in Brainport and in the Twente region, for example. If companies in alliances align their capabilities with defence demand, they can collectively become an attractive supplier. We hope our report will help companies, investors and the government seize this opportunity. So that together we can ensure that, due to the increased NATO standard, the investments are spent in a way that also benefits the Netherlands economically.'
Featured image: Pixabay
Report following the raising of the NATO standard: ‘Mobilising the Dutch defence industry’
See also: Ministry of Defence signs agreement with VDL to lease 120,000 m² of production space
