European Daily: Germany—Growth Opportunities in Defence, Digitization and Electrification

Research evidence excerpt

European Daily: Germany—Growth Opportunities in Defence, Digitization and Electrification

Economics Research

26 July 2026 | 7:46AM CEST

European Daily: Germany—Growth Opportunities in Defence,

Digitization and Electrification

n The German economy has stagnated for almost seven years as its traditional core Niklas Garnadt

+49(69)7532-1537 |

industries have come under pressure from higher energy prices and increased niklas.garnadt@gs.com

Goldman Sachs Bank Europe SE

competition with China. Against this backdrop we examine new growth

opportunities.

n Defence and IT services offer the clearest opportunities. While the defence

industry is still relatively small, German spending on defence equipment is rising

rapidly, supporting traditional manufacturers as well as a growing

defence-technology ecosystem. IT services—software, IT consulting, data

processing and hosting—already account for about 3.3% of aggregate value

added (only about 0.7pp less than the auto industry) and are growing at around

7% annually with data-centre investment expected to pick up further.

n Information and communication equipment and electrification provide

additional upside. Germany is Europe’s leading ICT equipment hub and the

semiconductor industry is currently expanding production capacities,

particularly for industrial chips. Electrification should lift demand for grid

infrastructure, batteries and electric motors as Europe expands its power grid

and electric vehicle-supply chains. However, these industries are smaller or grow

less rapidly than defence and IT services, limiting their macroeconomic impact.

Germany—Growth Opportunities in Defence, Digitization and

Electrification

The German economy has stagnated for almost seven years as its traditional core