Canada is the first OECD and NATO country to produce this kind of government statistical agency-based portrait of its defence industry. ISED and CADSI released the report last month. The data covers 2024 industrial activity, the most recent available from Statistics Canada's biennial defence industry survey, released this spring. Here's what it shows.

To read it properly, three numbers need to be kept separate.

The first is government defence spending: what Ottawa commits to the Department of National Defence, the CAF, and related departments. Canada has now crossed NATO's 2% GDP benchmark, putting total defence expenditure at more than $63 billion annually. That is a NATO-reporting number, not a measure of how much Ottawa buys from Canadian defence firms.

The second is industry revenue: what Canadian defence firms actually billed in 2024. That number is $17.3 billion, up 87% since 2014. It is a fraction of total government defence spending, because much of what Ottawa buys comes from foreign primes, foreign equipment, and foreign supply chains.

The third is GDP contribution: how much economic value the sector generated in Canada. That number is $11.1 billion, including direct industry activity, Canadian supplier activity, and consumer spending tied to sector employment. It should not be read as a simple "money stayed in Canada" calculation. The cleaner test of domestic industrial depth is supply-chain sourcing.

On that measure, Canadian defence firms sourced 53% of their supply chain from Canadian-based suppliers in 2024. The split varies by domain: air and space systems sourced 45% domestically, land and other defence 57%, and marine 62%. Marine leads partly because shipbuilding and vessel support are physically anchored to Canadian yards, skilled trades, and domestic infrastructure. Air and space, by contrast, sit inside more globalized supply chains.

That domestic-sourcing gap points to the central industrial challenge: Canada has a broad SMB base, with SMBs representing more than 90% of defence firms, but many have not yet scaled to the point where they can absorb the volume, certification demands, and delivery timelines that major programs require.

As Canada works toward NATO's 2035 targets, the central question is not just how much Ottawa spends. It is how much of that demand Canadian industry can actually absorb.

Canadian firms shipped nearly $8 billion in defence goods and services in 2024, with 70% going to Five Eyes partners. Continental European sales jumped 78% since 2022, a direct reflection of a continent taking its own security seriously. On the innovation side, government R&D grants to industry rose 309% between 2022 and 2024, a signal that Ottawa is investing in capability, not just procurement.

The headline numbers flatter if read in isolation. $63 billion in government defence expenditure. $17.3 billion in industry revenue. $11.1 billion in GDP contribution. Each figure tells a different part of the story.

The real test is what comes next: whether Canadian firms can capture more of the coming demand, deepen domestic supply chains, and turn higher defence spending into lasting industrial capacity.