Day 1 of SmallSat Europe 2026 left a blunt message hanging over the room: Europe does not have a technology problem so much as a buying problem. Capital is available, engineering capability exists and there is no shortage of talent, yet the system that turns ambition into contracts still favours the established industrial order.
That point came through from both the defence and business stages, where speakers converged on the same conclusion from different directions. Procureme...
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nt, they argued, is the choke point. Unless buyers change how they specify, classify and award work, fresh investment will simply flow into the same incumbent structures that have dominated the sector for years.
The European Commission has already acknowledged at least part of the issue. It launched a consultation on simplifying defence and sensitive security procurement rules, saying fragmented processes and limited cross-border access have held back small and medium-sized companies. The consultation closed in February and is intended to feed into proposals aimed at improving openness and innovation across the European Defence Technological and Industrial Base.
Speakers at the event went further, arguing that the current system is not just slow but structurally stacked against newcomers. In defence-related space work, requirements are often wrapped in secrecy from the outset, which means the firms best placed to read the rules are usually the ones already inside the circle. That creates a closed loop: no contract without clearance, no clearance without a contract.
One of the clearest counter-examples comes from the UK. According to the Ministry of Defence, it has awarded contracts worth up to £4 million each to 13 British technology companies in an effort to accelerate procurement and back future defence champions. The companies span areas from quantum sensing and autonomous systems to secure communications, space manufacturing and synthetic training. The government says the scheme is designed to bring in smaller firms with limited prior exposure to the MoD.
A similar logic has been visible at the European Space Agency. Companies that have worked with its Φ-lab investment programme have raised roughly €1 billion in private funding against about €150 million of ESA co-funding over four years, suggesting a leverage effect that many in the sector now want replicated more widely.
Ukraine has offered a more wartime version of the same lesson. Former deputy defence minister Kateryna Chernohorenko has said the key was to translate requirements into something industry could act on quickly, then pay for the work. That approach helped expand the country’s drone base from seven firms at the start of the 2022 invasion to around 500 by the end of 2024, while the Ramstein coalitions channelled billions of euros into IT and drone capability.
The concern in Europe is that, without a comparable procurement shift, fresh money will not translate into a broader industrial base. The continent’s defence market remains highly fragmented, according to McKinsey, which says consolidation could unlock major cost savings and improve interoperability. Other analysis has pointed to the same paradox: higher spending has not automatically produced stronger capability, with much of Europe’s procurement still leaking outside the bloc.
At SmallSat Europe, the message was that capital alone will not fix this. Venture funds and private equity can scale promising companies only if there are actual programmes of record, not just grants and pilot projects. Otherwise, the money pools into a system that already knows how to absorb it, while the next tier of suppliers remains stuck in the gap between prototype and production.
The practical choice, speakers suggested, is straightforward: separate what genuinely needs classification from what does not, and open the rest to competition. Europe has the budget, the technology and the political intent. What it still lacks is a procurement architecture built for the industrial reality it now wants to create.
Source: Noah Wire Services
