Developments in Canada’s defence sector mean new opportunities for businesses

This article was prepared with the assistance of summer student Chan-Min Roh.

Canada’s defence sector is undergoing a generational transformation. Over the past year, the Federal Government has made a series of significant announcements that together signal an unprecedented commitment to rebuilding domestic defence capacity with the help of Canadian businesses. For small and medium-sized enterprises (SMEs), technology firms, manufacturers and Indigenous-partnered enterprises across Canada, these developments create real, actionable opportunities.

Key announcements

The following Federal Government announcements are reshaping the defence landscape:

• Canada’s Defence Industrial Strategy (February 2026) – The Federal Government released “Security, Sovereignty and Prosperity,” a comprehensive strategy backed by $81.8 billion over five years. The strategy introduces a “Build-Partner-Buy” framework that prioritizes Canadian suppliers as a matter of policy, identifies 10 sovereign capabilities for domestic development (including aerospace, digital systems, space and uncrewed systems), and targets 70% of defence acquisitions going to Canadian firms, a 240%+ increase in defence industry revenues and the creation of 125,000 new jobs.
• Defence Investment Agency (DIA) – Created in October 2025, the DIA consolidates procurement functions previously spread across the Department of National Defence, Innovation, Science, and Economic Development Canada and Public Services and Procurement Canada. Legislation to make it a standalone entity is expected in 2026. The Agency will serve as the single point of contact for defence procurement and investment.
• BDC Defence Platform ($6 billion) – The Business Development Bank of Canada raised its defence funding cap to $6 billion, including $3.5 billion in financing and advisory support and $500 million in investment capital, through the StrongNorth Fund and the Catalyst Innovation Fund. All of these announced funds target SMEs.
• Regional Defence Investment Initiative ($357.7 million) – Zero-interest loans have been delivered through Regional Development Agencies, such as PrairiesCan, FedNor, PacifiCan and others. The funding specifically targets SMEs looking to scale and integrate into defence supply chains.
• EU-SAFE Partnership (December 2025) – Canada became the first non-European country to join the EU’s SAFE initiative, a €150 billion European defence-financing mechanism. The partnership gives Canadian contractors significantly improved opportunities to bid on European defence contracts.
• ITB Policy Reforms (early 2026) – The Industrial and Technological Benefits Policy requires major defence contractors to generate economic activity in Canada equal to the value of their contracts. Officially released in May of 2026, the Federal ITB Reforms include a new “Canadian Company Boost” for firms with 70–100% Canadian Content Value, enhanced multipliers for innovation and skills development and an Indigenous workforce development multiplier.
• Arctic and Northern Investment ($2.67 billion+) – The Northern Operational Support Hubs program will build dual-use logistics and operational sites in partnership with northern and Indigenous communities. A separate $1 billion Arctic Infrastructure Fund is accepting proposals for dual-use transportation projects.
• Innovation and R&D – $460 million for a new R&D platform, a $105 million Drone Innovation Hub, $656.9 million for dual civilian-military technology development and $10.9 billion for digital infrastructure modernization across DND, the Canadian Armed Forces and national security agencies.

What this means for Canadian businesses

The common thread across these announcements is a Federal policy preference for Canadian suppliers, Canadian content and Canadian intellectual property. The recent defence policy developments present several opportunities for businesses:

• SMEs and technology firms are the primary target of many of these programs. With 92% of Canada’s defence industrial base composed of SMEs, the BDC Defence Platform, Regional Defence Investment Initiative and forthcoming SME Procurement Program are designed to bring new entrants into the sector. Prime contractors with ITB obligations are also actively seeking Canadian subcontractors and supply chain partners to meet their commitments.
• Indigenous-owned and Indigenous-partnered businesses are explicitly prioritized across the DIS. The Northern Operational Support Hubs program, the Arctic Infrastructure Fund and the new Indigenous workforce development multiplier under the ITB Policy create a meaningful pathway into the defence supply chain. This is especially the case for businesses involved in infrastructure, logistics and northern operations.
• International defence companies entering or expanding in Canada need to navigate ITB obligations, Canadian Content Value structuring, security clearances, the Controlled Goods Program, export controls and Investment Canada Act review. The Build-Partner-Buy framework and Canada’s EU-SAFE membership create new avenues for partnership, but regulatory readiness is essential.

How MLT Aikins can help

Defence work is not a single-practice-area exercise. Successfully pursuing these opportunities requires coordinated legal advice across multiple disciplines. MLT Aikins brings together the following practice groups to support clients navigating the defence landscape:

• Government Procurement – Bid strategy, compliance, contract negotiation and dispute resolution for Federal and provincial defence procurements
• Competition, Investment and Trade – Merger review, joint venture structuring, Investment Canada Act and national security reviews and teaming arrangement compliance
• Corporate and M&A – Transaction structuring, joint ventures, private equity and venture capital investment and corporate reorganizations to optimize Canadian Content Value
• Regulatory Compliance – Export controls, Controlled Goods Program registration, security clearances and trade compliance programs
• Cybersecurity and Digital – Cybersecurity compliance, data governance, and digital infrastructure contracting
• Aviation and Drones/UAS – Regulatory advisory for aerospace platforms, drone operations, and uncrewed systems
• Indigenous Law and Partnerships — Indigenous procurement strategies, partnership structuring, duty to consult and Indigenous economic participation frameworks
• Immigration – Work permits and mobility for specialized defence personnel, including under the Canada Defence Skills Agenda

Contact us

These developments represent a once-in-a-generation alignment of political will and fiscal commitment in favour of Canadian defence businesses. The firms that benefit most will be those that move early, understand the regulatory landscape and position themselves strategically.

If you would like to discuss how these developments may affect your business, please reach out to any member of our team.

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