Export-controlled goods and compliance

Europe's defence industry is growing and export controls are becoming increasingly important

Europe is investing heavily in defence. EU defence spending reached 418 billion EUR in 2025, an increase of 20 percent compared with the previous year, as European countries continue to strengthen their defence capabilities and readiness.

The effects are also clearly visible in the Nordic defence industry. In Sweden, exports of military equipment exceeded SEK 28 billion in 2025, remaining at historically high levels. Perhaps even more telling is the development of the industry itself: according to the Swedish Inspectorate of Strategic Products (ISP), the number of Swedish companies manufacturing and supplying military equipment has tripled since 2018.This rapid expansion raises an important question: what is driving the growth, and what does it mean for companies entering the sector?

What is driving the growth?

Heightened geopolitical tensions and armed conflicts around the world are an obvious factor behind the current uncertainty.

European countries are rebuilding military stocks, increasing defence capabilities and investing in domestic production capacity. At the same time, modern defence systems increasingly rely on technologies such as sensors, electronics, advanced software, drones, communication systems and other technologies that may also have civilian applications.

This means that the defence supply chain is expanding beyond traditional defence manufacturers. In Sweden, the significant increase in the number of companies operating within the regulated defence sector is partly driven by new subcontractors entering the defence supply chain. For many of these companies, export control may therefore be a relatively new compliance area.

What does this mean for companies?

This growth creates significant commercial opportunities, but companies entering this sector also enter a highly regulated environment. Export controls can affect much more than the physical export of a finished military product.

Companies may need to consider:

• classification of military and dual-use products;
• export and transfer licences;
• end-user and end-use requirements;
• transfers of technology and software; and
• sanctions and other trade restrictions.

These questions can arise throughout the supply chain, including companies that may not traditionally consider themselves part of the defence industry.

For example, a software company developing encryption technology for secure communications may become subject to export control requirements when providing software updates, remote access or technical support to a defence contractor in another country.

Similarly, a manufacturer of sensors, optics or electronic components may supply products that are ultimately incorporated into military platforms, even though the same products also have civilian applications. In these situations, classification and licensing requirements can still become relevant.

Companies can also face export control risks when sharing technical data, engineering drawings, source code or manufacturing know-how with customers, suppliers or colleagues abroad. Even where no physical goods are shipped, the transfer of controlled technology may require prior authorisation from the relevant authorities.

A licence requirement identified late in a project can have significant consequences. Delays in obtaining approvals, restrictions on technology transfers or unexpected compliance obligations may affect project timelines, contractual commitments and customer relationships. Early assessment of export control requirements is therefore increasingly becoming a business-critical issue rather than a purely regulatory exercise.

For companies looking to participate in this growing market, identifying export control requirements early can therefore be critical. A licence requirement identified too late can delay a shipment, a technology transfer or, ultimately, the delivery of an entire project.

How can we help?

Our Global Trade team supports companies operating in or entering the defence sector with export control classification, licensing, end-user and end-use assessments, sanctions considerations, and the development of internal compliance programmes and practical export control processes.We regularly support companies across the defence, technology and manufacturing sectors in navigating complex export control requirements and integrating compliance into their day-to-day business operations.

Are you operating in the defence industry, considering entering the defence supply chain, or unsure how export controls apply to your products or technology?Contact us to discuss how we can support your business.