- European defense spending as a total is nearing $300 billion a year.
- The combined annual figure has been steadily rising since around 2015.
- U.K. investment plans could be hurt by weakness in sterling.
European defense spending will surpass $300 billion a year by 2021, according to new research from Jane's by IHS Markit.
Defense expenditure is a highly sensitive topic in the region. President Donald Trump has repeatedly criticized NATO member countries in Europe for not respecting a rule that says 2% of GDP (gross domestic product) should be spent on defense.
At a NATO summit in 2017, Trump ramped up that pressure by noting the U.S. had allocated more cash to defense than all the other NATO countries combined.
Fenella McGerty, principal budgets analyst at Jane's by IHS Markit said in the report Friday that with funding for European defense now appearing to trend higher, the U.S. president looks to be getting his way.
"Political factors are continuing to present a key driver as Europe responds to pressure from NATO allies — primarily the U.S. — to increase defense spending," said McGerty.
Jane's IHS Markit predicts the rise in spending will continue to tip over the £300 billion per year mark in 2021.
The analysis suggests that in 2019, European defense spending as a whole will grow by almost 5% from the previous year.
Janes said that Germany alone spent an estimated 11% more defense cash for 2019, while Sweden's defense budget was up nearly 9%. On average, Western European countries, which includes the big budgets of the U.K., Germany, Italy, and France grew by around 4%.
While much smaller in dollar terms, Eastern Europe's growth was even more pronounced with the aggregate defense spending of countries rising around 9% in 2019.
The U.K. has a plan to spend £186 billion ($241 billion) on defense equipment alone over a 10-year timescale. An estimated 25% will buy hardware originating from the United States.
Jane's analysis suggests that if the pound does not strengthen or if the economy continues to be sluggish, then this figure could fall sharply.