‘New NATO 5% norm provides a €41bn opportunity for Dutch manufacturing companies’

To meet NATO’s standard of core defence spending at 3.5% of GDP by 2035, Dutch defence expenditure will rise sharply: from €22 billion in 2025 to around €38 billion in 2030. Cumulatively, this amounts to approximately €178 billion in defence spend between 2025 and 2030. “Of that, around €41 billion could be available to the Dutch manufacturing sector,” estimates Bastiaan Oomens, a partner at PwC Strategy& working with manufacturing firms. “In our research, we identified over three thousand Dutch production companies that could play a role in meeting this massive scaling need, particularly as critical suppliers.”

There is especially strong growth potential for tier-n defence suppliers in the chain, explains Daniel de Jager, PwC partner for the public sector and responsible for services to the Ministry of Defence. “We have a limited number of Original Equipment Manufacturers (OEMs) in the Netherlands, who produce maritime vessels, small land vehicles and drones. Most defence equipment is purchased abroad. But there is significant room for the Dutch manufacturing sector in producing various high-quality subsystems and components.”

A tripling of output – that’s the challenge for existing Dutch defence manufacturing landscape to keep up with the investment increase, according to PwC Strategy& calculations. Oomens: “This requires professionalisation, expansion and optimisation of companies already active in defence. But they can’t meet the demand alone. It is key for non-defence focused manufacturing companies to apply their existing high-tech capabilities in defence applications and become ‘dual-use'. Suppliers with specialised defence solutions could eventually supply both domestic and foreign OEMs. All in all, this offers major opportunities for the Dutch high-tech manufacturing sector and for the long-term earning and innovation capacity of the Netherlands.”

Dutch manufacturing companies already produce technological innovations for the semiconductor and medtech industries that could also be valuable for defence – think optical technology, complex moving parts and advanced metalworking. However, access to the defence market is not easily gained. De Jager: “There are strict security requirements, certifications, procurement and sales restrictions, and various compliance issues. Financing can be complex, and companies must navigate the defence ecosystem as suppliers. These are all areas in which PwC can help develop a viable and scalable business case.”

In addition to organisational preparations, collaboration between manufacturing companies may be a key route to doing business in the defence industry. Oomens: “If manufacturing firms align their capabilities in alliances to meet defence demand, they can jointly become attractive suppliers. The combination of various technologies and capabilities can result in truly distinctive sub-systems. Of the more than three thousand Dutch companies we identified, most are small and medium-sized enterprises. Especially for these companies, forming partnerships is appealing. And we’re good at that in the Netherlands – just look at Brainport and the Twente region, where PwC is involved in many successful collaborations.”

Mobilising the Dutch defence industry offers data-driven insights for manufacturing companies exploring their entry points into the defence sector. PwC conducted interviews with various European OEMs and suppliers to map how investments are distributed across subsystems and components. The publication also outlines the required capabilities and technologies to produce those subsystems and components. Using AI, a detailed inventory of manufacturing companies was created, linking subsystems and components to Dutch firms capable of producing them. This provides a sector-wide view of opportunities that individual companies can use as a starting point for a business case.

In addition to civil manufacturing firms looking to enter the defence industry, the report also offers insights for investors, defence companies and the Ministries of Defence and Economic Affairs. De Jager: “Just as the defence ecosystem is a world of its own, the value chain of civil manufacturing firms is unfamiliar territory for many stakeholders in defence. With our report and advisory work, we aim to connect these worlds. In that way, we enable effective investments that are crucial for the Netherlands and for peace and security.”