Global defence spending rose to $2.63 trillion in 2025, up 2.5 per cent year on year, as great power rivalry and national insecurity continued to drive military investment, according to the latest edition of The Military Balance published by the International Institute for Strategic Studies (IISS).
In its 67th annual assessment, the London-based think tank said defence dynamics are undergoing rapid change, shaped in part by a shift in United States policy under President Donald Trump’s second administration. The report states that US defence strategy has pivoted more clearly towards homeland defence and burden-sharing, including proposals for a multi-layered “Golden Dome” missile defence system.
Direct US support for Ukraine has been curtailed, the IISS notes, while American forces face simultaneous pressures in the Caribbean, Indo-Pacific and Middle East.
Four years after Russia’s full-scale invasion of Ukraine, Moscow’s limited territorial gains have come at what the report describes as a high cost. Russia has nevertheless adapted and regenerated its forces, maintaining overall capability despite heavy losses. Trackable Russian military expenditure rose by 3 per cent in real terms in 2025, moderating compared with previous years, but still accounting for 7.3 per cent of GDP. In absolute terms, defence spending is now roughly triple its 2021 level.
Europe’s share of global defence spending has climbed to 21 per cent, up from 17 per cent in 2022. Germany’s spending increase accounts for around a quarter of European growth since 2024, with further significant rises in Belgium, the Nordic states and Spain. The IISS cautions, however, that procurement reform across the continent remains slow and insufficiently innovative, while industrial capacity constraints continue to hamper rearmament and efforts to strengthen air and missile defence.
In Asia, Chinese defence spending growth continues to outpace that of its neighbours. Beijing’s share of regional military expenditure has risen to almost 44 per cent in 2025, compared with an average of 37 per cent between 2010 and 2020. Despite a recent purge within the People’s Liberation Army command structure, the IISS finds little evidence of a corresponding decline in capability.
China has maintained sustained military pressure around Taiwan and continued naval expansion. The PLA Navy has commissioned the aircraft carrier Fujian and at least nine new major surface combatants, while ten new nuclear-powered submarines were launched between 2021 and 2025. According to the report, this outpaced the US Navy over the same period in terms of hull numbers and tonnage.
In the Middle East and North Africa, defence spending reached $219 billion, with states allocating an average of 4.3 per cent of GDP to defence. The IISS notes strengthened US defence partnerships with Gulf states including Qatar, Saudi Arabia and the United Arab Emirates.
Of course we need to increase spending, not disputing that at all.
But this does make me remember that the ideal global defence budget is zero. In an unachievable perfect world, no money would be spent on arms at all by any nation on earth. Everything that is spent reflects human’s inability to coexist without conflict. shame really
we still need to spend more
As a human race. We have a very very long way to go to co excist in peace.
Maybe this place could show the way ?
We could share the love and cuddles displayed on here every day with the rest of humanity and the world would live in peacefull harmony.
😁
I am a hugger. We should be able to leave cute mimes when Ivan the bot comes along to tell us how crap we are.
Just as a observation the USA spends over $900million of that figure. That is well over 30% of the total.
Me again.
I should have written £900bn. The 30% figure is when there are $1000bn in a £1 trillion
MPPP is massively relevant.
US Defence spending is hugely inefficient.
Ahh “Trillion”.
That’ll be the Short Scale Trillion then. 1,000,000,000,000 rather than the long scale Trillion, 1,000,000,000,000,000.
I learnt that from Jonny Ball !
You missed a few zeros there buddy, the old English Long Scale for a Trillion had 18 zeros, written as
1,000,000,000,000,000,000. In those days a Tri-llion was a million cubed – 3 groups of 6 zeros.
Harold Wilson officially moved the UK to the Short Scale in 1974 because British Ministers kept getting confused in meetings with Americans. When they were talking about ‘billions’, the Americans were thinking of a number 1,000 times smaller!
The FT is reporting that UK defence spending may actually decrease next year. Because of all the government spending (pensions, Ukraine, housing, foreign military aid, cyber security, industrial grants and subsidies …) that has been re-classified as defence spending, the 2.5% target GDP will almost certainly be exceeded in 2026/27 and the Treasury wants to claw back the “extra” money back in 2027/28.
Ukraine alone is a c.0.2% addition, i.e. £3-4 bn p.a. – enough in just one year for a couple of T31’s, a few extra P-8As and E-7’s, and another regiment of CR3’s. I’m not suggesting that we stop supporting Ukraine, just pointing out that the government and Treasury are using it as an excuse to defund our own armed forces.
RB your concern is very real, we are hitting the percentage target perfectly, but we are doing it with pensions and aid rather than with the hard power like Type 31s and CR3s that the current global situation requires. (see below).
The IISS notes that the British government is utilising measures like ‘broadening the definition of defence’ and private financing to navigate its significant fiscal pressures while trying to keep pace with the broader European structural spending surge.
The Military Balance 2026 released by the IISS, shows that UK’s defence spending is up in both real and nominal terms … though its trajectory is often described as fiscally constrained compared to the dramatic surges seen in its neighbours.
While countries like Germany, Belgium, and Spain are making headline-grabbing financial leaps, they come from what were previously very low baselines, Germany alone passing £75 billion to become Europe’s largest spender, the UK’s growth is part of a longer, steadier climb. For the 25/26’ period, the UK’s defence budget reached approximately £62.2 billion, representing a real-terms annual growth rate of about 3.8%. Although the UK was overtaken by Germany in total £ terms for the first time since the cold war, it still maintains a higher defence burden as a percentage of its economy, currently sitting at roughly 2.4% of GDP.
The reason the UK’s increase feels less ‘explosive’ is twofold.
Firstly, unlike the Nordic states or Spain, the UK was already spending above the 2% NATO target, so its current path to 2.5% by 2027 and 3.5% by 2035 is an incremental build on an already high baseline.
Secondly, a massive portion of Britain’s increased funding is swallowed by long-term strategic costs that the ‘new’ spenders simply don’t have, specifically the nuclear deterrent, which accounts for nearly half of the equipment budget (nearly 50% of the UK’s equipment budget is tied to the Dreadnought-class submarines.)
So, while the UK is technically spending more than ever, it is navigating a difficult balance between maintaining its sophisticated nuclear and carrier capabilities and the need to modernise conventional forces at the same pace as the rest of a rapidly rearming Europe.
The ‘creative accounting’ mentioned is actually the official NATO Standard Definition. While it might seem that the UK is ‘gaming the system,’ the reality is that Britain was actually quite late to the party in including these items compared to its European neighbours and the US. Plus the UK spends more on personnel costs, pensions and salaries than many of the new spenders.
The numbers that matter are in the MoD Core Equipment Budget, the actual £££’s spent on ‘ships, tanks and planes etc.’ The core budget for the current 25/26’ year is £61.7 billion, the other £10-12 billion needed to hit the NATO target is made up of non-combat costs like military pensions, intelligence agencies; GCHQ, MI5, MI6, and foreign military aid (Ukraine).
Maybe the Spring Statement on Tuesday, March 3, will shed some light. The OBR report, will reveal the updated numbers for growth, inflation, and public borrowing. If those numbers are better than expected, it gives the MoD more ammunition to ask for that 3% GDP target later this year.
A good summary Magenta. It reminds us of the big picture, so often overlooked on here. Two things stand out for me
1) we are spending nearly as much on 11 nuclear submarines as we are on our entire air force, navy.and army equipment procurement budgets combined. No wonder we are so horribly deficient in numbers of fighter jets, warships and a shedload of missing army equipment. No wonder service personnel numbers have had to be cut to the current dismally small establishment.
In the case of the SSBNs, they are a triumph of national political hubris over rather more pressing military needs. If it is deemed so essential that the UK, almost alone among 80+ ENATO and Commonwealth allies, has an independent nuclear deterrent, then it should come from the national purse, separate from and additional to, the core defence budget. We should equally be moving determinedly to spread a good slice of the cost among our ENATO allies. Should we be moving to 9 Euro SSBNs, 3 operated by the RN, 3 by the French Navy, 3 by the other main Euro nations, Germany, Italy snd Spain, with a trio of fingers on the trigger? No need to mention the difficulties, they argue for themselves, but could be overcome. For sure, we cannot afford to be the sole nuclear umbrella holder for ENATO, with France declining to provide any guarantees outside its own borders and reliance on the USA no longer being a reliable political-military option.
2) This business about what is core defence and what is other ancillary security and infrastructure spend needs to be set out clearly, because otherwise the politicos and Treasury will keep sweeping odd bits of this and that into the defence budget in a bid to show 2.5% or 3.5% of GDP.
Certainly the services’ share of the intelligence budget should come out of core. It is going to, on paper, because intelligence is going to have its own budget, 0.1% of GDP by 2027/8.
Likewise, support for Ukraine. It is essential, but cannot be part of the core budget. Historically, such expenditure came from the Treasury’s contingency fund.
The cost of the Atomic Weapons Establishment is another one that should largely or wholly depart the core defence budget, as much of its work informs the civil nuclear and CRBN sectors.
Service pensions are not included in the core defence budget, as they come from the DWP. But NATO adds military pension to our core defence spend, so our 2.34% of GDP in 2024/5 is shown in NATO tables as 2.4%.
I think service housing should be in the core budget Magenta, as it currently is. I think that it’s a NATO-wide rule.
I don’t know what all else Osborne and successors crammed into the defence budget, but it needs shaken back out. There are other grey area ones like the new munitions factories, cost of Sheffield Forgemasters, etc, should they be in core or switched to this 1.5% infrastructure budget.
It is important, because we are not really spending 2.4% of GDP on core defence at the moment, probably closer to 2.1%. This determines how much extra defence really needs to get to 2.5%, 3% or the target 3.5%. Unless this additional infrastructure/security/foreign aid/etc is stripped out of the core defence figure and presented separately – the DIP would be a good opportunity to do so – then the core defence figures will be continually massaged by the Treasury to present a rosy but false picture of what we are really spending.