Governments and businesses respond to Trump pressures by upping spending in domestically controlled infrastructure
US tariffs may be squeezing Europe's trade balance, but they are also pushing governments and businesses to spend big on keeping tech closer to home.
A new forecast from Forrester says that European tech spending will climb 6.3 percent in 2026, lifting the continent's tech bill above €1.5 trillion for the first time, as governments and enterprises pour cash into AI, cloud, cybersecurity, and the infrastructure needed to run them without leaning quite so heavily on US providers.
US tariffs are already causing problems, and Ireland is feeling it more than most thanks to its reliance on US multinationals. The knock-on effect is a smaller EU trade surplus and slower growth in the countries most exposed. Even so, Forrester expects the wider EU economy to hold its nerve, with real GDP growth in 2026 matching 2025, supported by strong intra-European trade and a steady ramp-up in defense spending.
That resilience is showing up most clearly in tech budgets. Hardware leads the charge, with spending forecast to jump 14.3 percent as organizations scramble to buy AI-optimized servers and supporting infrastructure. Software follows closely behind, with an 11.2 percent increase driven by demand for cybersecurity tools and public cloud platforms. IT services growth lags at 3.7 percent, a gap that suggests a broader shift toward owning critical capabilities rather than renting them indefinitely from hyperscalers.
Forrester frames much of this as a sovereignty play, and it is hard to argue otherwise. Across Europe, money is going into sovereign cloud platforms, AI-ready infrastructure, and tighter rules on where data lives and who can access it.
The UK, Brexit or not, is heading the same way, putting more weight behind domestic AI compute, cloud infrastructure, and homegrown chip efforts.
Defense and healthcare sit at the center of that strategy. Forrester expects UK defense R&D spending to grow by about 9 percent a year from 2026 to 2030, driven by geopolitical tensions and a renewed appetite for advanced equipment. Healthcare is heading the same way, with NHS technology spending on track to almost double to £10 billion by 2029 as the service leans on digital systems to plug staffing gaps and keep aging infrastructure going.
Michael O'Grady, principal forecast analyst at Forrester, says the UK has largely moved past AI dabbling and into day-to-day use, especially in financial services, where - he claims - around three-quarters of firms already have AI running in production.
"The UK is moving swiftly from AI experimentation to performance, particularly in the financial sector," he said. "Despite external economic pressures and tariff risks, the UK's strategy to increase AI compute capacity and target £22.6 billion in R&D spending by 2030 signals a clear, long-term vision for technological leadership."
Forrester isn't pretending tariffs, power limits, or geopolitics have magically disappeared. What the numbers do show is that Europe has stopped waiting for things to calm down.
The money is going in now, sovereignty is back on the agenda, and the thinking seems to be that owning more of the stack is less painful than relying on it later. ®