Question Period Note: Defence industrial strategy

• Canada has an innovative, highly skilled and globally competitive defence and security sector with close to 600 firms nationwide.
• The launch of Canada’s Defence Industrial Strategy marks our commitment to deepening these partnerships and further strengthening Canada’s defence industrial base.
• Budget 2025 provided an initial commitment of $6.6 billion over five years to the Strategy, including $2.1 billion in this fiscal year.
• The Strategy will provide secure, reliable, and timely capabilities to the Canadian Armed Forces and our allies.
• It will also drive innovation and strengthen supply chains.
• The Strategy is expected to create 125,000 jobs for Canadians, increase Canada’s defence exports by 50%, and grow Canadian defence industry revenues by 240%.
• Defence revenues for Canadian small and medium-sized businesses are forecast to grow by more than $5.1 billion annually.

• Announced on February 17, 2026, the Defence Industrial Strategy (DIS) is intended to transform Canada’s defence industry by prioritizing Canadian suppliers and materials, investing in Canadian innovation and commercialization, and streamlining procurement to give businesses consistent and predictable demand.
• To procure the equipment and services needed by the Canadian Armed Forces (CAF) National Defence works closely with partners in other departments such as Public Services and Procurement Canada (PSPC), the newly created Defence Investment Agency (DIA), and Innovation, Science and Economic Development (ISED).
• Canada has an Industrial and Technological Benefits (ITB) policy, managed by ISED, which leverages Defence and Canadian Coast Guard procurements to contribute to jobs, innovation and economic growth across the country. This policy will be updated early in 2026 to align with DIS aims.
  The Defence Industrial Role of the Provinces, Territories, and Indigenous Rightsholders
• Provinces, territories, and Indigenous (PTI) governments control many of the levers that shape the operating environment for the CAF and the defence industrial base. The DIS underscores the importance of PTI collaboration, notably to advance infrastructure and workforce development.
• Quebec is home to almost 25% of Canada’s defence industry employment, with strengths in aerospace, munitions, ground transportation, marine innovation, advanced materials and manufacturing, and digital technologies, including quantum. The province is home to six prime contractors, including Bombardier and CAE. Quebec has taken significant steps to bolster its defence industry, naming it as a priority sector, allowing Invest Quebec to invest in certain defence-related enterprises, and establishing an Interministerial Committee on the Defence of Quebec.
• Ontario is home to over 35% of Canada’s defence industry employment, with a leading role in combat vehicles, airborne sensors and warning systems, munitions, and aircraft manufacturing. In its 2025 budget, Ontario made strategic investments in its defence sector, including through a $215 million shipbuilding commitment.
• Atlantic Canada is home to 20% of Canada’s defence industry employment, with top activities including shipbuilding, aircraft maintenance, repair, and operations (MRO), robotics, space launch, and marine technology. Irving Shipbuilding Inc., in Halifax, Nova Scotia is a major partner in the National Shipbuilding Strategy. The city also hosts NATO’s Defence Innovation Accelerator for the North Atlantic (DIANA), and DIANA’s COVE site is the first Maritime-focused Defence Innovation Secure Hub under the Bureau of Research, Engineering and Advanced Leadership in Innovation and Science (BOREALIS). Nova Scotia recently stood up a Defence Leadership Table to further spur growth in its defence sector.
• Western and Northern Canada are home to 20% of jobs in Canada’s defence industry. Top activities in these regions include aircraft MRO, naval shipbuilding, design, and MRO, life sciences, and digital technologies, including quantum. SkyAlyne, a partnership between CAE and KF Aerospace, provides training and operational support in Manitoba and Saskatchewan, and Cascade Aerospace in Abbotsford, British Columbia (BC), provides maintenance services for CC-130 Hercules aircraft. Seaspan Shipyards, in Victoria and Vancouver, BC, is a major partner in the National Shipbuilding Strategy. BC and Alberta have developed provincial industrial strategies that prioritize defence-related sectors.
• Indigenous governments and rightsholders are key partners for building the defence industrial base, notably in the North. Alongside the provinces and territories, they play a vital and constitutional role, particularly in natural resource and infrastructure development. The DIS includes initiatives to enhance their participation in the defence supply chain, already supported through the mandatory minimum 5% Indigenous federal procurement target.
  Space Launch
• The Government of Canada has committed $182.6 million over three years (starting 2025–26) to establish a sovereign Canadian space-launch capability, reducing dependence on foreign launch providers for critical space access.
• As part of this commitment, the Department of National Defence (DND)/Innovation for Defence Excellence and Security (IDEaS) program is investing $105 million in the development of responsive light-lift launch systems for small payloads by 2028-29 to accelerate Canadian space-launch-related innovation and to strengthen the foundations needed for future sovereign launch capability.
• Investing in sovereign launch capability now means that Canadians and their businesses can participate in the space economy and reap benefits for decades to come. A domestic launch capability also supports national security and strategic autonomy by enabling rapid, reliable access to space for defence, communications, surveillance, and future DND/CAF missions without reliance on foreign launch providers.
  Budget 2025
• Budget 2025 committed $6.6 billion over five years to the initial investments of the DIS. Of this, a total of $4.6 billion has already been allocated to a series of initial investments starting this year to improve access to capital, drive research and innovation, bolster domestic supply chains, and grow critical resource stockpiles.
• This includes:
  • $182.6 million over three years, starting in 2025-26, for DND to establish a sovereign space launch capability.
  • $68.2 million over three years, starting in 2025-26, for DND, ISED, the National Research Council (NRC), and the Communications Security Establishment (CSE) to establish BOREALIS.
  • $1.0 billion in 2025-26 to create a new Defence and Security Business Mobilization Program at the Business Development Bank of Canada.
  • $656.9 million over five years, starting 2025-26, to ISED to develop and commercialize dual civilian-military technologies.
  • $334.3 million over five years, starting in 2025-26, to ISED, NRC, and the Natural Sciences and Engineering Research Council of Canada (NSERC) for a suite of measures to help anchor quantum technology companies in Canada and provide pathways to technology adoption in defence-related applications and industries.
  • $443.0 million over five years, starting in 2025-26, to NRCan and ISED to support the development of innovative critical minerals processing technologies, support joint investments with Allies in Canadian critical minerals projects, and develop a critical mineral stockpiling mechanism to strengthen Canadian and Allied national security.
    
    Post-Budget Announcements
• Since the release of Budget 2025, notable investments have been announced by the Government, including:
  • $528.5 million for the European Space Agency to promote Canadian space technology innovation and access to the European market.
  • $244.2 million over three years for the NRC to stand up a Defence Industry Assist Program that will provide funding and advice to high-potential, innovative Canadian small and medium-sized enterprises.
  • $357 million over three years to the federal regional development agencies for a new Regional Defence Investment Initiative to help integrate SMEs into domestic and international defence supply chains, enhance industrial and innovation capacity, and foster regional economic development.
    
    2022 Canadian defence industry key figures[^1]
• Generated $14.3 billion in revenues from its more than 585 firms.
• Contributed $9.6 billion in Gross Domestic Product (GDP).
• Contributed over 81,200 jobs to the Canadian economy.
• Exported over $7 billion in goods in services, of which close to 70% was to Canada’s Five Eyes partners.
• Firms with fewer than 250 employees represented over 85% of firms in the Canadian defence industry.
• The Canadian defence industry was over three times more Research and Development intensive than the broader manufacturing sector.

Quick facts

The Five Pillars of the Defence Industrial Strategy (DIS)
* Renewing our relationship with industry;
* Procuring strategically through the new Defence Investment Agency and a new ‘Build-Partner-Buy” framework;
* Investing purposefully to strengthen an innovative Canadian defence sector;
* Securing supply chains for key inputs and goods; and
* Working with domestic partners, including in Canada’s North and Arctic.
Anticipated Benefits of the DIS
* $125 billion downstream economic benefit by 2035;
* Increase of Canada’s defence exports by 50%;
* Raised share of defence acquisitions awarded to Canadian firms to 70%; and
* Rise of maritime fleet serviceability to 75%, land fleets to 80% and aerospace fleets to 85% to bolster Canadian defence.
Key Sovereign Capabilities
* The DIS identifies priority areas for investment to maximize strategic autonomy for capabilities critical to the defence of Canada and where Canada has an existing or potential advantage, these include:
* Aerospace - Aerospace Platforms; Avionics; and Aircraft Communications
* Ammunition - Common Ammunition; Battle-Decisive Munitions; Small Arms; Missiles and Bombs;
* Digital Systems - Secure Cloud; Artificial Intelligence; Quantum Computing and Communications; Integrated Command, Control and Communications; High- Assurance Communications Equipment;
* In-Service Support - Naval; Land; Air;
* Personnel Protection - Medical Counter Measures;
* Sensors - Marine Sensors; Quantum Sensors; Electronic Warfare;
* Space - Space-Based Intelligence; Surveillance and Reconnaissance; Space Domain Awareness; Satellite Communications; Space Launch;
* Specialized Manufacturing - Land Vehicles / Surface Ships, including Icebreakers and Marine Systems;
* Training and Simulation - Naval; Land; Air; and
* Uncrewed and Autonomous Systems - Uncrewed and Autonomous Land, Aerial, Underwater and Surface Systems (including Uncrewed Collaborative Platforms)
Responsible Principals: Assistant Deputy Minister (Finance), Assistant Deputy Minister (Policy), Assistant Deputy Minister (Materiel), Assistant Deputy Minister (Policy-Industry), Assistant Deputy Minister (Defence Research and Development Canada)
Drafted by: DG Policy Coordination: Parliamentary Affairs
Date Approved: February 23, 2026