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Canada is entering a period of sustained major defence investment. The Defence Industrial Strategy, Budget 2025, and related initiatives will channel large-scale public investments into technologies, infrastructure and services that serve both defence and civilian needs, from artificial intelligence (AI) and cybersecurity to medical technologies and rehabilitation, Arctic infrastructure and modular housing, advanced manufacturing and technical textiles. These investments will reshape demand for skills and training, and could have far-reaching effects on communities and labour markets.

Small and medium‑sized enterprises are central to this agenda. They already account for roughly 92% of Canada’s defence industrial base and 40% of its employment. The Defence Industrial Strategy sets targets to increase annual defence revenues for SMEs by more than $5.1 billion while also growing the share of defence acquisitions awarded to Canadian firms to 70% and create up to 125,000 new jobs over the next decade. At the same time, new investments in dual‑use infrastructure, including Arctic airports, seaports, roads and hubs that serve both military and community needs, will draw on construction firms, skilled trades and community‑based businesses that may never have considered themselves part of the defence sector.

The analysis in this research report shows that many SMEs with relevant capabilities are not yet positioned to benefit from these opportunities. Barriers arise at multiple points along the path from initial interest to recurring revenue: first becoming aware that the opportunity exists and could apply to them, identifying credible defence use cases, understanding where demand exists, meeting security and compliance requirements, financing entry and scale, and navigating complex procurement systems. These challenges are compounded equity-deserving, Indigenous and northern entrepreneurs, who face persistent gaps in access to capital, information, networks and infrastructure.

The report also highlights critical skills and training needs, including defence market intelligence, compliance and cybersecurity readiness, procurement and bid development, intellectual property management, digital and AI adoption, and the industrial and trades capabilities required to deliver dual‑use infrastructure and platforms. These needs should not be treated as universal. Small and medium-sized enterprises exploring defence opportunities may need awareness, fit assessment, and market positioning. SMEs preparing to enter may need support with compliance, cybersecurity, procurement, partnerships, and financing. SMEs already active in defence or dual-use markets may need support with workforce planning, production readiness, export readiness, and supply-chain integration. Supports also need to reflect sector, location and identities of owners, including the distinct barriers facing women-owned, Indigenous-owned, racialized, immigrant-owned, northern and rural SMEs.

The recommendations call for a coordinated package of tailored supports to help SMEs become aware of, identify and pursue opportunities in defence and dual-use markets. These include outreach and awareness-building, practical market intelligence, procurement and subcontracting guidance, defence-relevant skills development, advisory services, financing, and export readiness support. Programs should be adapted to firms’ stage of development, sector, location, and ownership or leadership, while linking capital to needs such as compliance, hiring, technology adoption, operational improvement, and production scaling. The recommendations also emphasize inclusive program design, disaggregated data collection, outcome measurement and attention to local context, particularly in Arctic and northern communities where defence investment intersects with Indigenous economic participation, community infrastructure and distinctive workforce and delivery conditions.