Private investors must pile cash into defence to fill public funding gap, executives say

By Iain Withers

FARNBOROUGH, England, July 20 (Reuters) - Private investors are needed to funnel cash into European defence companies to plug the gap left by cash-strapped governments, but too often bottlenecks and barriers are discouraging investment, senior finance executives told the Farnborough Airshow on Monday.

“Public spending will not be enough, and we do need to mobilise private capital at scale," Cathal Deasy, global co-head of investment banking at British bank Barclays, told delegates, adding national governments needed to act faster and provide more clarity.

Bankers and investors are attending the annual aerospace event in record numbers this year, according to the event organisers, in part drawn by the prospect of cashing in on a global boom in defence investing amid rising geopolitical tensions.

However, investor sentiment has cooled recently, reflected in weaker defence firm stock prices, while Franco-German defence group KNDS this month put on hold its stock market listing until conditions improve.

More than 600 finance delegates are scheduled to attend Farnborough, up about threefold on 2025, including executives from Goldman Sachs, JPMorgan and Qatar's sovereign wealth fund.

"With defence companies growing, banks see an opportunity to jump in," Amin Mansour, a vice chairman at Dutch bank ING, told Reuters ahead of the event, adding the lender now had about 50 cross-sector bankers working on defence funding deals compared to "very few" five years ago.

'RECKONING' FOR DEFENCE VALUATIONS

The recent rally in European defence stocks has slowed this year. An index of aerospace and defence names is up 1.3% since the start of 2026, while the wider STOXX 600 gained 8%. 

An executive at one of the U.S.'s largest private equity houses, who declined to be named, said defence firm valuations had faced a "reckoning" over the past year, but had since normalised and become more investible.

Others said too many smaller defence contractors were still missing out on private funds due to factors like complex procurement.

“It’s getting the capital into the supply chain which is challenging and which does create bottlenecks," said Ephraim Rudman, financial institutions group partner at Apollo.

(Reporting by Iain Withers, Additional reporting by Alun John, Editing by Tommy Wilkes and Sharon Singleton)