Defence Investment: The New Engine of Economic Growth

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As countries increase their defence investment, there is a renewed focus on the social value of defence spending. Private capital from abroad can maximise the economic gains of the defence dividend.

Written by Brigadier (Ret’d) Recep Ozdemir and Calibre Defence in partnership with Nurol Makina.

The End of the Post-Cold War Security Illusion 

NATO countries are confronting their most severe and complex security challenges since the end of the Cold War. The ongoing war in Ukraine has served as a brutal reminder of conventional warfare’s reality at Europe’s doorstep, shattering the security illusions of the post-Cold War era. This new environment of profound and dangerous uncertainty makes it imperative for governments to take far more comprehensive and concrete measures to ensure national security—their primary responsibility.

The “nature of war” as famously defined by Carl von Clausewitz, remains timeless and immutable—even as its character continues to evolve.  Recent conflicts have reaffirmed that the evolving character of war increasingly demands not only economic strength and technological sophistication, but also the industrial depth, adaptability, and resilience necessary to sustain combat operations over time.

The heavy losses incurred during the initial phases of war, the pervasive uncertainty, the blurring of frontlines, the indeterminate duration of conflict, and the wide-ranging destructiveness extending deep into rear areas—combined with the strategic surprise delivered by new tactics and technologies, which continue to reshape the character of warfare—collectively underscore the resurgence of “mass” as a fundamental Principle of War. This principle, long established in military thought, is now being reasserted in the form of a “High-Low Mix” of capabilities, blending high-end systems with large numbers of lower-cost, scalable platforms. These developments are compelling nations to fundamentally reassess their defence postures and security strategies.

The New Strategic Response: Building a Defence-Economy Ecosystem

Many nations are increasing their defence expenditures at an unprecedented pace. Accordingly, as stated in the NATO 2025 Hague Summit Declaration, Allies have committed to allocate 5% of their GDP annually to core defence requirements as well as broader defence- and security-related spending by 2035. This commitment is the clearest indicator of a new resolve, aiming for each ally to become a more valuable and capable contributor to the collective defence of the Alliance. But the ultimate question is not how much to spend, but how to build.

The answer lies in a paradigm shift of seismic proportions. We must cease to view defence as a cost centre and see it as the very heart of the national strategy. Indeed, modern states now view defence spending not merely as a security cost but as a powerful lever for economic growth, technological advancement, and societal prosperity. The objective is twofold: to build deterrence against current and future threats while channelling these investments into a virtuous economic cycle. National security and economic security are, more than ever, two deeply intertwined pillars of national power. In other words, a nation’s industrial strength and economic resilience are now directly linked to its security. This new approach demands that all elements of national power are utilized in an effective, synchronized manner and that new mechanisms are established to support this fusion.

The Economic Multiplier Effect: Forging Prosperity from Security

At the heart of this new strategy lies a powerful domestic defence industry supported by a resilient and secure supply chain. The domestic production of critical capabilities and reduced reliance on others guarantee operational independence during crises. The economic and social benefits of this model are multi-layered: 

• Economic Growth and High-Skilled Employment: Domestic production stimulates the establishment of new factories, creates thousands of high-skilled jobs, and fuels the growth of SMEs within the supply chain. This directly contributes to regional development, aligning with policies like the UK’s “Levelling Up” agenda, which seeks to distribute economic opportunity across the country.
• Human Capital Development: The defence sector’s demand for high-technology expertise in engineering, software, AI, and R&D drives the need for a highly skilled workforce. This boosts the national skills base through tailored educational programs, apprenticeships, and university-industry collaborations, creating a pipeline of talent for the future.
• Technological Innovation and Exports: Driving innovation is key to productivity. R&D in defence often pioneers “dual-use” technologies that have transformative applications in the civilian sector, from AI and cybersecurity to autonomous systems and advanced materials. This technological leadership enhances a nation’s export potential, strengthening its competitive position in the global market.

Governments must play a central role in creating this virtuous cycle. The right policies and signals create the ideal defence investment environment to attract both domestic and foreign capital. Equally, the wrong signals can shut that investment off. 

This environment must be built on transparent rules, predictable long-term priorities, infrastructural support, reduced bureaucracy and legal guarantees, alongside incentives in areas like tax and energy. Lithuania has taken this approach, offering fast-track export licenses in 25 working days or less, support to set up a factory within six months, and reduced taxes for qualifying businesses. Estonia has followed suit, stating clearly how much it plans to invest in ammunition over the next two years. Critically, governments must evolve their relationship with defence firms, viewing them not as simple contractors but as strategic partners in national security and prosperity. This partnership model, which champions and rewards innovation, will foster competition, driving up quality while optimising costs.

Pioneers of the New Model: A Case Study in Strategic Defence Investment

Practical applications of this theoretical framework are emerging globally. Rheinmetall’s investments in artillery ammunition production in Lithuania and heavy weapon barrel production in the UK, Tekever’s agreement to produce electronic warfare UAVs for the RAF in Wales, and Helsing’s AI-focused investment in Plymouth are all tangible examples of this new model.

In this context, the activities of Nurol Makina, a privately-owned global player originating from Turkey, and its new UK-based subsidiary, NMS UK, exemplify this forward-thinking model.

• Through its strong cooperation with user countries—including various NATO members —Nurol Makina has consistently delivered protected mobility vehicles tailored to their operational requirements. This ongoing collaboration has positioned the company as a supplier of choice in the protected mobility segment, ensuring maximum operational readiness and effectiveness. As a well-known global integrator with a strong track record of customization and responsiveness to end-user requirements, it provides not just a protected mobility vehicle, but a “networked, survivable, and adaptable system-of-systems.”

• NMS UK, established in 2023, represents a strategic step to fill a capability gap in 4×4 land mobility protected vehicles within the UK, and to reduce reliance on overseas production. The company has aligned itself with the UK’s “IS-8 Priority High-Growth Sectors,” specifically “Defence and Advanced Manufacturing.” Its facility is in Leamington Spa, within the West Midlands Combined Authority—a designated “Super-Cluster” with a rich ecosystem of suppliers, talent, and innovation partners targeted for government support.

With these deliberate choices, NMS UK‘s defence investment is not just a commercial venture; it is a direct contribution to the UK’s industrial resilience. Furthermore, with its platforms’ “design for exportability” from the outset, NMS UK is positioned to contribute directly to the UK economy and the defence of its allies.

The company has demonstrated its commitment to rapid local integration through a concrete collaboration with NP Aerospace, which provided battlefield ambulance design and integration services in line with British Army standards for one of NMS UK’s vehicles. As a global company, NMS UK’s commitment to open-architecture design and platform configurability enables it to develop multiple variants within the same vehicle family, while remaining adaptable to future technologies and mission requirements thus ensuring long-term operational effectiveness. 

NMS UK has worked closely with British companies and conducted a detailed analysis of the supply chain to maximize UK content in its products. Through this determined approach, NMS UK has aligned its corporate strategy with national objectives, not only addressing a critical operational requirement of the British Army independently but also actively contributing to the rebuilding of the UK’s defence industrial base and delivering tangible benefits to the local economy and public welfare.

Conclusion: The Symbiotic Future of Security and Economy

Today’s challenging security environment compels nations to integrate their defence and economic policies. When managed wisely, defence spending transcends its primary security function to become a powerful engine for economic growth, a crucible for technological innovation, and a catalyst for social prosperity. This new approach, built on a symbiotic relationship between security and the economy, holds immense potential.

Pioneering steps that demonstrate this potential are already visible across the continent. Significant investments by Rheinmetall, the acquisition of Iveco by Leonardo, advanced UAV agreements from Tekever, the AI-centric focus of Helsing, and the strategic industrial positioning of firms like Nurol Makina and its UK subsidiary, NMS UK, all point towards this new reality. The success of this model hinges on an environment of mutual trust and long-term commitment. Most promising outcomes will arise where governments cultivate a stable policy landscape—viewing industry as a vital partner—and where companies, in turn, invest deeply in the local ecosystem to deliver lasting value.

Ultimately, the future belongs to those nations that successfully fuse their national security imperatives with their visions for economic development. Supporting those visions with foreign defence investments and capital is one way to guarantee success, and taxpayer efficiency. The 21st century will be won by those who understand that building a shield can also forge the engine of prosperity.

About the author: Brigadier (Ret’d) Recep Ozdemir served for over seven years within NATO’s Strategic Command and Force structure and spent more than 25 years in the Turkish Armed Forces. Since 2020, he has been serving as Defence Advisor to the Executive Board of Nurol Holding.