The European Commission has confirmed that EU member states can access additional fiscal flexibility to increase defence and energy security spending, under provisions embedded in the 2026 European Semester Spring Package published this week.

Under the National Escape Clause for defence, member states are permitted to spend up to an additional 1.5% of GDP on defence without breaching EU fiscal rules. In a significant development, the Commission has now expanded the scope of that clause to include energy resilience measures, reflecting the growing recognition that energy security and defence capability are increasingly intertwined priorities.

Member states can now apply for fiscal flexibility to cover measures undertaken since February 2026 that reduce dependence on imported fossil fuels and strengthen Europe’s broader security and resilience. A dedicated annual cap of 0.3% of GDP applies for the period 2026 to 2028, with a cumulative cap of 0.6% of GDP over that same period for energy resilience spending specifically.

What This Means for the Defence Supply Chain

For the UK and European defence supply chain, the practical significance of these provisions is considerable. By giving member states formal permission to increase defence expenditure outside normal fiscal constraints, the Commission is effectively signalling a sustained period of elevated defence spending across the continent.

For UK suppliers, primes and SMEs operating in or seeking to enter European defence markets, this points to a pipeline of procurement activity that is likely to grow rather than contract over the coming years. NATO allies across Europe are under pressure to modernise capabilities, increase stockpiles and invest in dual-use technologies, all of which generate supply chain opportunities.

The expansion of the clause to cover energy security measures is also notable. Technologies and services that sit across the defence and energy resilience space, including grid protection, critical infrastructure security and energy diversification, are increasingly being viewed through a defence procurement lens, opening new routes to market for suppliers with relevant capability.

The Spring Package’s broader emphasis on closing the innovation gap, reducing strategic dependencies and accelerating digital transformation further reinforces the direction of travel for European defence and security procurement in 2026 and beyond.