Europe's Defense and Security Boom: Why Investors Should Bet on Strategic Realignment Post-Brexit

The geopolitical landscape in Europe is undergoing a seismic shift, driven by post-Brexit realignment, rising U.S. protectionism, and escalating security threats. This is creating a rare confluence of opportunities in two sectors: defense technology collaboration and migration control infrastructure. For investors, the message is clear: Europe's defense and security industries are primed for growth, and now is the time to position for what could be a multi-decade boom.

The German-British Defense Tech Powerhouse

The cornerstone of Europe's defense renaissance is the German-British collaboration, epitomized by the Eurofighter Typhoon program and emerging AI-driven systems like Stark's unmanned platforms.

The Typhoon's revival is no accident. After years of stagnation, 40 new/refurbished Typhoons were approved for Turkey in 2024—a deal that broke a German political impasse and underscored NATO solidarity. Meanwhile, Saudi Arabia's $13B order for 48 Typhoons and Qatar's 12-jet addition have kept UK production lines humming. BAE Systems, the UK's defense giant, has avoided layoffs at its Lancashire factory, which assembles 37% of Typhoon components.

But the real growth lies in future programs. The Tempest sixth-generation fighter initiative, led by the UK with Germany, Italy, and Japan, aims to fly a demonstrator by 2027. This program is underpinned by AI integration, including Stark's autonomous systems, which could redefine air combat.

Investment angle: BAE Systems (BA.L) is a clear beneficiary, with its backlog expanding as exports surge. Its stock has underperformed on geopolitical fears, but fundamentals are strong: Tempest's development and Typhoon's 30-year service extension (now to 2040) could push valuation multiples higher.

Migration Control: The New Infrastructure Play

While defense tech grabs headlines, migration control infrastructure is a stealthier but equally compelling opportunity. Post-Brexit, the EU has ramped up efforts to tighten borders, with deportation orders rising 18.4% in early 2025—a sign of institutionalized crackdowns.

Eastern European nations like Poland and the Baltic states are driving this shift. Their focus on securing the EU's eastern frontier—via projects like the Baltic Defence Line—is backed by record budget requests for border security. The EU's European Travel Information and Authorization System (ETIAS), launching soon, will require visa-exempt travelers to undergo digital checks—a boon for surveillance tech firms.

Investment angle: Companies like Thales (THLS.PA), which supplies border control systems, and cybersecurity firms like Darktrace (DRK.L) are well-positioned. Thales's share price has lagged due to macroeconomic fears, but its order book for surveillance and AI-driven border systems is robust.

The U.S. Factor: Trump's Policies Are Accelerating Europe's Autonomy

The Trump administration's stricter enforcement stance—evident in $19.6B allocated to U.S. border control in FY2024—has indirectly pressured the EU to adopt similar measures. While the EU's approach is more legally nuanced (e.g., requiring “safe country” transparency), the end result is increased spending on defense and border tech.

The divergence in approaches creates a sweet spot: the EU's emphasis on transparency and systemic solutions could make its defense-tech ecosystem more export-ready, especially as U.S. allies seek alternatives to American dominance.

Risks and Why They're Overblown

Critics cite geopolitical risks—Turkey's F-35/Kaan project, Saudi Arabia's human rights issues—but these are manageable. The Typhoon's operational necessity (e.g., intercepting Russian aircraft since 2014) ensures program survival. Similarly, migration control's human rights controversies are offset by institutional momentum: the EU's 4.3M Ukrainians under temporary protection highlight the need for orderly systems.

Final Call: Buy European Defense and Security Now

The numbers are compelling:
- Eurofighter exports: >100 new jets sold since 2023, sustaining UK jobs and supply chains.
- Defense budgets: EU defense spending is rising, with the UK targeting 3.5% of GDP by 2030.
- Migration control: Deportations up 6.4%, with funding requests soaring for eastern border projects.

Act now:
1. BAE Systems (BA.L): Buy the dip at 52-week lows; Tempest and Typhoon orders justify a P/E expansion.
2. Thales (THLS.PA): Invest in its border tech division, which aligns with EU's ETIAS rollout.
3. AI/Drone plays: Look to private firms like Stark Industries (if listed) or public peers like Airbus (AIR.PA) for autonomous systems.

The geopolitical tailwinds are here. Europe's defense and security sectors are no longer cyclical—they're structural.