Increased German defence spending is an opportunity for UK businesses
The increase in German defence spending is an opportunity for UK businesses operating within European defence and security supply chains, say leading audit, tax and business advisory firm, Blick Rothenberg.
Nils Schmidt‑Soltau, a partner at the firm, said: “The latest budget and tax data published in the German Federal Ministry of Finance’s September 2026 Monthly Report shows that German defence expenditure increased by 27.4% year-on-year in the first eight months of 2026, while military procurement spending rose by 46.2%. This is creating opportunities not only for German manufacturers but also for UK businesses operating within European defence and security supply chains.”
He added: “Germany remains the UK’s second-largest trading partner, making developments in German profitability, government spending and procurement priorities directly relevant to UK businesses. The rapid increase in defence spending is creating opportunities for businesses operating within European defence and security supply chains. However, the broader tax data tell a more cautious story, with the federal government’s share of corporation tax receipts falling 14.5% year-on-year in the first eight months of 2026, suggesting that many German businesses continue to face profitability pressures.”
He added: “The trend has become more pronounced since the August 2026 budget update. At the end of July 2026, the federal government’s share of corporation tax receipts was down 9.6% year-on-year. Although tax revenues are influenced by filing and assessment timing, the weakness in business-related taxes broadly mirrors the pressures reported across parts of German industry. Overall federal tax revenues fell by 3.2% year-on-year.”
Nils said: “At the same time, federal expenditure increased by 4.7% year-on-year, contributing to a budget deficit of €67.7bn by the end of August 2026. This increase in spending was driven in part by higher defence expenditure, increased pension subsidies and additional support for social security systems.”