Canada’s Defence Industrial Strategy: What businesses need to know

This article appears in our 2026 Defence Outlook guide, which explores the key trends shaping Canada’s aerospace and defence sectors. Read the full outlook and download our guide here.

On February 17, 2026, Prime Minister Mark Carney announced Canada’s Defence Industrial Strategy (“the Strategy”), a foundational policy framework that links Canada’s national defence, economic security, and industrial growth. The Strategy is grounded in the government’s view that Canada’s sovereignty, military readiness, and long-term economic prosperity increasingly depend on a strong domestic defence industrial and technological base.

A central theme of the Strategy is that defence capability and economic strength reinforce one another.^[1] Defence investment is framed not only as essential to equipping and sustaining the Canadian Armed Forces, but also as a catalyst for productivity, innovation, high-value job creation, and supply-chain resilience. In this context, defence procurement is treated as a long-term industrial signal rather than a series of individual investments.

The Strategy sets out clear results the government intends to achieve over the next decade, including:

• Raising fleet serviceability to 75% for maritime fleets, 80% for land fleets, and 85% for aerospace fleets
• Increasing the share of defence acquisitions awarded to Canadian firms to 70%
• Boosting government investment in defence-related research and development by 85%
• Increasing total Canadian defence industry revenues by more than 240%
• Growing defence revenues for Canadian small- and medium-sized businesses by more than $5.1 billion annually
• Increasing Canada’s defence exports by 50%
• Creating 125,000 new high-quality jobs across the Canadian economy

These outcomes are supported by projected investments of approximately $180 billion in defence procurement, $290 billion in defence-related capital investment, and $125 billion in downstream economic benefits by 2035, amounting to more than half a trillion dollars in total economic impact to the Canadian economy.

To deliver these results, the Strategy is structured around five key pillars:

• Pillar I – Renewing Canada’s relationship with industry
• Pillar II – Procuring strategically through the Defence Investment Agency and a new Build–Partner–Buy framework
• Pillar III – Investing purposefully to strengthen an innovative Canadian defence sector
• Pillar IV – Securing supply chains for key inputs and goods
• Pillar V – Working with key domestic partners, including in Canada’s North and Arctic

Pillar I: Renewing Canada’s relationship with industry

Under this pillar, the government commits to fundamentally changing how it works with Canadian defence companies.^[2] Industry is positioned as a long-term partner in building and sustaining the Canadian Armed Forces, rather than as a transactional supplier responding to individual procurements. The Strategy acknowledges that past procurement approaches created uncertainty, discouraged investment, and limited the ability of Canadian firms to scale.

The government signals an intention to provide clearer and more predictable demand signals, earlier engagement with industry, and reduced regulatory burden, particularly for small- and medium-sized enterprises. This pillar is closely tied to the creation of new institutions and engagement mechanisms intended to normalize ongoing dialogue between government and industry.

Key commitments under the Strategy:

• Establish a permanent Defence Advisory Forum, led by the Defence Investment Agency, to enable structured and regular industry engagement.
• Accelerate security clearance and facility accreditation processes, beginning in 2026.
• Improve transparency and predictability of defence procurement pipelines.
• Position the Defence Investment Agency as a central point of contact to help industry navigate procurement, innovation funding, and industrial benefit programs.

Pillar II: Procuring strategically through Build–Partner–Buy

This pillar introduces the most consequential shift in defence procurement policy by formalizing Build–Partner–Buy as the governing framework for all future defence acquisitions.^[3] Under this approach, Canada will first build domestically where it has existing strength or where a capability is deemed essential to preserving Canada’s sovereignty, prioritizing Canadian firms, manufacturing, and intellectual property (IP).

Where domestic capacity does not yet exist or where collaboration offers strategic advantage, Canada will partner with trusted allies through co-development, joint production, or shared sustainment arrangements. Only where neither domestic build nor partnership is feasible will Canada buy from allies, and then subject to conditions designed to ensure reinvestment in Canada, long-term sustainment capability, and sovereign control over operations and critical technologies.

Key commitments under the Strategy:

• Apply the Build–Partner–Buy framework to all future defence procurements.
• Introduce legislation in 2026 to establish the Defence Investment Agency as a standalone entity with consolidated procurement authority.
• Increase the share of defence acquisitions awarded to Canadian firms to 70% within a decade.
• Reform the Industrial and Technological Benefits (ITB) Policy in early 2026 to align credits with sovereign capability, innovation, exports, and workforce development.^[4]
• Establish a framework by summer 2026 to identify and onboard select Canadian defence firms as strategic industrial partners.
• Use national security and sovereign capability considerations to prioritize Canadian suppliers where appropriate.

Pillar III: Investing purposefully to strengthen an innovative Canadian defence sector

This pillar reflects the government’s view that future defence capability will be driven by innovation in areas such as artificial intelligence, cyber, quantum, space, uncrewed systems, and advanced manufacturing.^[5] The Strategy emphasizes the need to better align Canada’s research ecosystem with defence priorities and to accelerate the transition from research to deployable capability.

Commercialization, scale-up, and export readiness are the government’s central themes. The Strategy also treats intellectual property as a strategic asset, with a clear preference for Canadian ownership and sovereign access to defence-related IP.

Key commitments under the Strategy:

• Establish Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS) to coordinate defence research and accelerate innovation in frontier technologies.
• Create a Drone Innovation Hub at the National Research Council.
• Launch a $4 billion Defence Platform at the Business Development Bank of Canada to improve access to capital for defence firms.
• Provide targeted funding to support development and commercialization of defence and dual-use technologies.
• Create a dedicated defence export promotion team and expand Trade Commissioner support in the United Kingdom and key European markets.
• Prioritize Canadian ownership, protection, and sovereign access to defence-related IP in procurement and partnership structures.

Pillar IV: Securing supply chains for key inputs and goods

This pillar positions supply-chain resilience as a national security imperative.^[6] The Strategy highlights the risks posed by global supply disruptions and foreign dependence for critical materials, components, and energetic inputs, and commits to rebuilding domestic production capacity in priority areas. Workforce availability is also addressed as a supply-chain issue, with explicit links between industrial growth, skills development, and labour mobility.

Key commitments under the Strategy:

• Launch the Canadian Defence Industry Resilience Program in 2026.
• Establish domestic production of nitrocellulose, a critical energetic material used in ammunition.
• Increase domestic production capacity for Canadian defence businesses.
• Accelerate development of Canadian supply chains aligned with the North Atlantic Treaty Organization (NATO) and allied requirements.
• Support development of defence-critical minerals projects.
• Maintain and strengthen investment screening and export control frameworks to protect sensitive technologies.
• Launch a Canada Defence Skills Agenda to strengthen the defence workforce pipeline and address urgent skills shortages.

Pillar V: Working with key domestic partners, including in Canada’s North and Arctic

The final pillar emphasizes that defence industrial growth requires a whole-of-country approach. The Strategy commits to closer coordination with provinces, territories, and Indigenous rights holders to align defence infrastructure, workforce development, and industrial investment. Significant emphasis is placed on Canada’s North and Arctic, where defence investments are framed as both security necessities and economic development opportunities, especially through dual-use infrastructure.^[7]

This aligns with the goals set out in the Arctic Foreign Policy, released in December 2024, as highlighted in our Defence Forecast 2025.

Key commitments under the Strategy:

• Work with provinces and territories to align defence infrastructure and industrial development priorities.
• Engage Indigenous rights holders in defence-related economic opportunities.
• Expand dual-use infrastructure, including Northern Operational Support Hubs, to strengthen Arctic logistics and sovereignty.
• Coordinate national efforts on critical minerals, technology development, and industrial investment.

Outlook

The Defence Industrial Strategy marks a decisive shift from policy intent to operational execution. The government’s stated aim is for defence procurement and investment decisions to be more centralized, more deliberate, quicker, and more closely aligned with long-term industrial objectives. Domestic capability, sovereign control over critical technologies, supply-chain resilience, and workforce readiness are expected to play a far more prominent role in how procurements are designed, evaluated, and awarded.

For defence, aerospace, and dual-use technology companies, the Strategy presents a valuable roadmap on how to strengthen their relationship with government. Firms that are positioned to build in Canada will be best placed to benefit. How companies align their investment, governance, and growth strategies with these priorities will shape access to opportunities as the Strategy moves from commitment to implementation over the coming decade.