The EU's joint defence procurement plans may end up hurting smaller Finnish companies, according to a new report by the Research Institute of the Finnish Economy (Etla).

The report warns that the bloc's proposed shared defence purchasing system could favour Europe's largest defence contractors, while putting smaller or medium-sized firms — like those that dominate Finland's defence industry — at a disadvantage.

"Whether Finnish companies benefit from joint procurement depends on their ability to deliver competitive products quickly," said Etla's forecasting director Päivi Puonti in a statement.

"The risk is that in a highly competitive environment, large European players will strengthen their position while smaller ones lose ground."

The concern comes in response to the EU's 150 billion euro Security Action For Europe (Safe) defence loan instrument, approved earlier this year. The programme allows member states to finance joint defence purchases using EU-backed loans and aims to consolidate defence production across the bloc.

According to Puonti, however, the loan conditions only offer a favourable deal for a handful of member states.

"At the moment, the SAFE instrument offers attractive financing primarily to Italy, France, and Spain," she said.

"For many other countries, including Finland, similar investments would be more cost-effective through national financing."