Insider Brief
- Canada’s 2025 federal budget allocates $334.3 million over five years to strengthen the nation’s quantum technology ecosystem under the new Defence Industrial Strategy.
- The funding, managed by ISED, NRC, and NSERC, aims to anchor quantum companies in Canada and accelerate technology adoption in defence-related industries.
- The investment is part of a broader $6.6 billion package to rebuild Canada’s defence capacity and drive innovation in emerging sectors such as AI, quantum, and cybersecurity.
- Photo by mayns82 on Pixabay
Canada’s 2025 budget turns on the green light to the quantum sector with the federal plan allocating C$334.3 million (about $239 million US) over five years to anchor quantum-technology firms in Canada and accelerate defense-industry adoption.
In the details of the 2025 budget, the government earmarks C$223.1 million for quantum research and C$111.2 million for industry-oriented measures. The funding will flow under the new Defence Industrial Strategy, starting in fiscal 2025-26. The goal: to strengthen Canada’s standing in quantum technologies, especially for defense and dual-use applications.
The budget documents frame quantum — and its sibling “dual-use” technologies — as central to Canada’s innovation and productivity push. It places those technologies alongside artificial intelligence, advanced manufacturing and critical minerals in a strategy designed to bolster productivity and sovereignty. The budget states that one of its “core objectives” is harnessing Canada’s strength as a leading developer of quantum and AI.
Quantum Industry Canada’s CEO Lisa Lambert said the budget offers a sign that Canada’s policymakers are beginning to realize the transformative power of quantum.
“Quantum technologies are rapidly becoming the next engine of economic growth and national security,” Lambert writes. “They are already transforming how nations compute, communicate, sense, and secure, and the countries that scale first will set the pace for the rest of the world,” Lambert writes in the organization’s newsletter. “Budget 2025’s investment of $334.3 million over five years under the new Defence Industrial Strategy is a meaningful step, signalling that Canada recognizes quantum as critical infrastructure for both our economy and our defense. It also appears there are additional measures in the budget that could further support the sector’s development, and we’re keen to understand how these will be coordinated and implemented.”
Why Quantum Now?
Quantum technology refers to computing and sensing systems that rely on quantum mechanics — phenomena like superposition or entanglement — to perform tasks that classical systems struggle with. In the defense context, quantum could impact secure communications, sensors for detecting submarines or underground structures, and algorithmic tasks such as optimisation or cryptography.
By situating quantum investment within a defense-and-security industrial strategy, the government signals that quantum is no longer purely academic, but is part of a broader national competitiveness and industrial base agenda.
The quantum funding is embedded in a larger envelope of defense and technology investment. For example, the budget provides C$656.9 million over five years to the Department of Industry (ISED) to develop dual-use technologies across industries, and establishes a new Defence Investment Agency to accelerate large-value procurement.
The budget also links quantum funding to “anchoring” companies in Canada — meaning the aim is to build domestic firms or bring international actors to set up in Canada so that quantum innovation and manufacturing stay on Canadian soil.
Industry, Research and IP: A Three-Pronged Approach
The quantum-specific funding is complemented by broader measures in the budget targeting research infrastructure, intellectual-property (IP) regimes and tax incentives. On the research front, the budget details C$1 billion over 13 years to the federal granting councils to recruit exceptional international researchers into Canadian universities, plus C$400 million over seven years for research infrastructure support. This creates a pipeline for talent that quantum firms may draw upon.
For IP, the budget allocates C$84.4 million over four years for the “Elevate IP” program, C$22.5 million over three years for the Innovation Asset Collective’s Patent Collective and C$75 million over three years for the National Research Council’s IP Assist Program. The government commits to an IP performance review to help scale IP-intensive firms and keep commercialization in Canada. For quantum firms — often built on novel physics and deep tech — strong IP frameworks can determine whether global value ends up flowing back to Canadian firms or gets captured elsewhere.
On the tax front, budget measures include a drop in the marginal effective tax rate by 2.4 percentage points to improve competitiveness with the U.S., the launch of a “Productivity Super-Deduction” for enhanced write-off of new capital investments, and updates to the long-running Scientific Research and Experimental Development (SR&ED) credit, including a new elective pre-claim approval process and use of AI to streamline administration. These incentives create an improved financial climate for deep-tech firms, including quantum startups, to invest and scale.
Canada’s Quantum Ambition
Experts suggest that the investment signals are bold but they arrive in a increasingly competitive global field. Canada will need to ensure that its quantum ecosystem offers more than funding. It will need infrastructure (such as clean-room fabrication, cryogenic test labs, photonics manufacturing), firm-founding support and rapid pathways from proof of concept to deployment.
By tying quantum investment to defense procurement and dual-use technology development, the budget may help accelerate real-world use cases for quantum in Canada (and thus commercial viability). The budget notes that the initial R&D initiatives in advanced technologies “could add as much as C$6.1 billion to Canada’s national income over the long term.”
Aligning quantum with sovereignty and domestic industrial capacitym — which nations across the glow are beginning to wrestle with — suggests that the government sees quantum not just as a curiosity but a component of national competitiveness and as one of the “foundations” on which Canada will build the future economy.
Urgent Patience
Deep-tech firms face long development cycles, capital intensity and talent constraints.
The budget establishes a Defence Investment Agency (C$30.8 million over four years) to accelerate large-value projects. For quantum firms, access to meaningful procurement opportunities will help de-risk technology development and deliver a domestic market. The budget also sets aside C$105.9 million starting 2026-27 to implement a new “Buy Canadian” policy and C$79.9 million over five years for an SME procurement program, both of which could benefit Canadian quantum firms if they integrate into defense supply chains.
Another challenge for the quantum community — globally, not just in Canada — is talent. While the budget is aggressive on recruiting international researchers and doctoral/post-doctoral fellows, quantum demands both physics and engineering skillsets, and Canada must compete globally with the U.S., Europe and Asia. Whether the funding translates quickly into domestic quantum engineers and teams will be critical.
The quantum allocation spans five years starting 2025-26. But many of the broader venture-capital measures (for growth-stage funding) take effect in 2026-27 and beyond. A lag between foundational funding and exit or commercialization may erode momentum. Firms, universities and investors will need clear timelines and milestones.
The budget also addresses market validation. Government funding can de-risk early stages, but for quantum firms to scale they must build commercial models. The budget’s tax incentives, IP reforms and procurement policies help — but success will depend on companies turning nascent quantum advantages into paying customers, whether in defense, sensing, communications or computation.
“To lead, Canada must move from ideas to industrialization, investing at the scale the reality and opportunity demands to build, deploy, and export the quantum technologies that will defend our sovereignty today and drive our prosperity tomorrow,” said Lambert.
