Europe
German capital flows into the defense industry as traditional sectors face crisis
German capital is pouring into the defense industry from all sectors. While Germany’s traditional industrial sectors face a major crisis, German capital is focusing intently on large, anticipated orders from the German Armed Forces.
This trend is evident in the German Security and Defense Industry Federation (BDSV). According to the federation’s own data, its membership has nearly doubled from 243 to 440 since November 2024, with two-thirds of its members coming from the “Mittelstand”—historic, family-owned companies that are generally broader than typical SMEs.
Cathrin Wilhelm, who is responsible for the Mittelstand at BDSV, told the Handelsblatt daily, “We are virtually being inundated with interested parties. Many companies are suppliers to the automotive and machinery industries and are struggling with capacity utilization. They now see an opportunity for growth in the defense sector.”
Fabian Kienbaum, who provides personnel consulting services to family businesses, also believes such an opportunity exists. “Those with the technology, production competence, and quality standards are looking more closely at whether they can position themselves as suppliers for the defense industry or for defense orders,” he states.
This particularly concerns mechanical components, assembly, or coatings. “The need for qualified personnel to carry out these transformations is immense,” says Kienbaum.
Handelsblatt examines how highly experts rate this potential by focusing on three Mittelstand companies.
Germany’s defense budget alone is set to increase from its current €80 billion to €170 billion. The consulting agency McKinsey also estimates that by then, the annual volume of the European defense industry market will rise to €335 billion, which is almost three times its current size.
A large portion of this belongs to major corporations like the Dax group Rheinmetall, tank manufacturer KNDS, or the military division of Airbus. These companies, in turn, subcontract 80% of their orders.
According to its own data, industry leader Rheinmetall has approximately 23,000 suppliers, most of which are medium-sized enterprises. Meanwhile, many automotive suppliers are in desperate need of orders.
However, the issue is not just about better utilization of production capacities. The war in Ukraine has led to a change in thinking within many family businesses. Furthermore, the prospect of Donald Trump taking office and the promise of limited US aid are pushing many Mittelstand companies to actively enter this sector.
“Deciding to work for defense industry companies is one thing, but deciding to have weapons produced with your own technology is another,” says a managing partner of a machine manufacturer from Sauerland who wished to remain anonymous.
In February, another machine manufacturer asked if they wanted to participate jointly in a tender for a defense project. The tender was seeking machines for the production of artillery shells.
However, the family company in question had decided from its founding day not to produce for the defense industry. Was this decision still valid in 2025?
The entrepreneur spoke with his partners. The moment Trump questioned the NATO alliance at the beginning of the year was decisive: “We understood that our values of peace and freedom were never questioned, but today, different decisions must be made than in the past.” This “realization,” according to Handelsblatt, united the family.
“Many families are divided over whether to set aside their statutes and beliefs that emerged during the Cold War,” says Tom Rüsen, general manager of the Witten Institute for Family Business Foundation.
According to him, “Generation Z” does not see a problem with armaments, but the post-World War II “baby boomer” generation and Generation X see more issues.
Consequently, the family decided to involve the employees in the process. “We wanted to give everyone an opportunity to understand our decision-making process and our struggle,” says the entrepreneur.
Ultimately, the conclusion was reached that “sustainability is not possible without democracy and freedom,” and “the employees understood this as well.”
“Not everyone would have made the same decision,” says the entrepreneur, “but they understand that we have taken a sincere stance and did not just accept this job because the opportunity was right. That was important to us.”
At the same time, the partners determined that this decision should be reviewed every year and limited the maximum annual order volume from the defense industry: “Those who can decide anew annually are those who do not become dependent.” Meanwhile, the company received the order, and there are other requests.
Another newcomer to the sector is Grüninger Electronics, located in Weinstadt near Stuttgart. Managing partner Thomas Hagen openly admits that he knew very little about the defense and security industry until now, which is why he joined the BDSV.
Grüninger specializes in 3D-printed circuit boards. The company manufactures circuit boards and, through “reverse engineering,” reprints, repairs, and re-equips them.
Circuit boards are found in every modern car and are now also used in the defense industry.
However, a large portion of circuit boards are manufactured in Taiwan and China, with Europe holding only 2% of the world market.
Würth recently ceased its circuit board production. “Those who value data sovereignty and resilience should keep the knowledge in the country,” says Hagen. 3D-printed circuit boards are independent of supply chains, and the data remains in-house.
Hagen is continuing his discussions with potential customers during the development phase. Just obtaining the necessary permits for this took nine weeks.
But if Grüninger wants to apply as a supplier, the certification process will be much more complex and lengthy. Hagen, however, sees great potential. Even “old circuit boards” can be reprinted, equipped, and tested, thereby producing spare parts for existing boards. This could significantly increase the operational availability of submarines or tanks, for example.
Many are only now realizing the high demands placed on the sector. The German Armed Forces’ Military Security Service (MAD) vets everyone who works directly with the army. Such a security check currently takes 18 months.
Until now, Grüninger supplied companies in Germany active in mechanical and plant engineering, aerospace technology, and electrical engineering. As a supplier to the defense industry, Hagen plans to significantly grow his company.
The third example company is Armoured Car Systems (ACS), part of the Gruma Group in Friedberg near Augsburg, which produces small series of armored off-road vehicles.
ACS specializes in armoring off-road vehicles like the Mercedes G-Class with its own superstructures. Until now, ACS was a smaller part of the family business; five years ago, it had only 35 employees, whereas today it has 135. This German Mittelstand company knows the peculiarities of the defense industry well.
In 2022, its insurance company announced it would terminate the contract due to the business’s incompatibility with the taxonomy rules at the time. The termination of insurance coverage would have affected the entire corporate group, which has 1,400 employees.
General manager Sebastian Schaubeck explained that the reason was the ACS subsidiary, which operates in the security and defense technology field.
At that time, the EU considered the financing of defense industry companies to be incompatible with the Union’s sustainability goals. “This sector was not valued; on the contrary, no one saw its benefits,” Schaubeck complains.
The war in Ukraine also marked a turning point for ACS. At the end of 2022, the insurance company gave the entire group the green light but did not want to make a public statement.
Looking back, Schaubeck assesses the shock of the Ukraine war: “The reputation [in the sector] has completely changed.” This also applies to political support. For example, SPD’s German Defense Minister Boris Pistorius became the first defense minister in a long time to join the BDSV.
The fact that ACS is already benefiting from a boom is largely related to the company’s decision to start investing in its own vehicle class in 2019, a period when the company was making a loss.
ACS developed and patented a modular vehicle based on the Mercedes G-Class. “This was something the entrepreneurial family achieved entirely with its own resources,” says the ACS general manager. It is also noted that the shareholders were convinced to invest in security for the long term.
According to Wilhelm from the BDSV, securing capital remains a major obstacle for many Mittelstand companies in the defense sector.
Although many banks and funds have changed their statutes that previously rejected armaments as an unethical investment, financing remains a weak point.
Europe
EU member states vote to extend suspension of US retaliatory tariffs in Airbus-Boeing dispute
EU member states decided on Thursday to suspend retaliatory tariffs imposed by the bloc on the US as part of the long-running Airbus-Boeing dispute.
The move, first reported by POLITICO, comes as Brussels seeks to prevent a reignition of the transatlantic trade war during a period of eased tensions between the EU and the US.
This week, the European Union gave its final approval to the trade agreement signed with President Donald Trump last year.
Thursday’s vote extends the suspension period of the EU’s retaliatory tariffs. These tariffs affect $4 billion worth of US imports, including aircraft, tobacco, and alcoholic beverages.
These tariffs were first implemented in 2020 at the height of the transatlantic dispute over subsidies granted to Airbus and Boeing.
For nearly two decades, the European Union and the US accused each other of providing illegal subsidies to Airbus and Boeing.
Following years of legal battles, the World Trade Organization ruled that both sides had violated the rules, paving the way for retaliatory tariffs affecting $11.5 billion in bilateral trade.
A truce reached between the European Commission and the Biden administration in 2021 had suspended the dispute since then. The truce was set to expire on July 11.
An EU official stated that negotiations between Washington and Brussels are still ongoing regarding how long the new suspension period will last.
Europe
Andy Burnham emerges as frontrunner for UK leadership after Keir Starmer resigns
Following the resignation of Prime Minister Keir Starmer from both his government post and the leadership of the Labour Party, Andy Burnham has emerged as the most likely figure to assume the UK’s leadership.
Burnham, the former Mayor of Greater Manchester, was elected to the House of Commons two weeks ago after winning a by-election in Makerfield by a wide margin.
Long prominent within the Labour Party as a leading rival to Starmer, Burnham has so far faced no declared challengers in the race for the party leadership.
Having expressed regret 20 years later for voting “yes” in the 2003 parliamentary division on the invasion of Iraq, Burnham built his early political career as a mid-ranking government official under Tony Blair’s Labour administration.
Burnham points to a pivotal moment in his political life when he was booed at a match at Liverpool’s famous Anfield stadium while serving as Culture and Sport Secretary in the government of Blair’s successor, Gordon Brown.
Representing the Brown administration at Anfield on the 20th anniversary of the 1989 Hillsborough disaster, in which 97 Liverpool fans lost their lives, the then 39-year-old minister’s attempt to deliver condolences was interrupted by loud, angry shouts from the stands demanding justice for the victims.
Up to that point, successive British governments had rejected demands for a public inquiry into the disaster. Burnham says that from that moment on, he decided to pursue politics “outside of London” and to become “a voice for the voiceless.”
According to a profile in The Guardian, critics have dubbed Burnham “Captain U-turn” for giving the impression of shifting his political views over the decades, while others view him as “a man who listens.”
After graduating from university, Burnham moved to London, where he briefly worked for trade publications such as Tank World and Passenger World Management before securing a role as a researcher in the parliamentary office of Labour MP Tessa Jowell.
Having also advised the Culture Secretary of the time, Chris Smith, Burnham was elected as an MP for his hometown constituency of Leigh in Greater Manchester in 2001.
He initially served as a junior minister in the Blair administration before joining the cabinet under Brown as Chief Secretary to the Treasury. He later served as Culture Secretary and subsequently Health Secretary.
In 2010, Burnham ran for the Labour leadership on a platform of “passionate socialism” but finished fourth out of five candidates, losing to Ed Miliband, who campaigned on moving the party further to the left.
Following Miliband’s defeat in the 2015 general election, Burnham ran for the leadership again, adopting a more moderate, “centrist” rhetoric aimed at highlighting a business-friendly stance.
Launching his campaign at the headquarters of professional services firm Ernst & Young, Burnham argued that entrepreneurs should be seen as “every bit as much our heroes as nurses.” He ultimately lost that contest to Jeremy Corbyn.
Burnham accepted a shadow cabinet role under Corbyn, taking on the position of Shadow Home Secretary. He was also one of the few frontbenchers who did not resign from Corbyn’s team in 2016 when the Labour leader was accused by some of failing to campaign actively enough to remain in the EU, a factor critics argued contributed to the Brexit victory.
In 2017, Burnham left Corbyn’s shadow cabinet to run for the newly created position of Mayor of Greater Manchester.
He won the election with more than 60% of the vote and was re-elected by an even larger margin in 2021.
During his tenure in Manchester, he won praise for reforming the region’s transport network by bringing bus services back under public control.
His fierce advocacy for a region that lagged economically behind much of the rest of the country earned him the moniker “King of the North.”
Upon becoming Mayor of Manchester, he pledged to eradicate rough sleeping. In the initial years, progress was made, with the number of rough sleepers nearly halved by the onset of the COVID-19 pandemic compared to 2016 levels. However, Burnham was unable to sustain this progress; by November 2025, the number of rough sleepers had returned to 2016 levels.
Should he become Prime Minister, Burnham’s primary challenge will be addressing the UK’s economic decline. According to some assertions, the prospective leader could move to reverse the privatizations that have defined the country for the past 40 years, turning instead to renationalization.
Under a new blueprint dubbed “Manchesterism,” an Andy Burnham administration could seek to reverse 40 years of privatization through a long-term plan to take over failing public utilities, issue debt-for-equity swaps, and establish competitive state-owned enterprises.
This policy paper, titled “The Productive State,” was published just as Burnham arrived in London to take his oath as MP for Makerfield.
The paper’s author, Mathew Lawrence—who is close to Burnham and worked alongside him on plans to bring public services under state control—released the document in coordination with Mainstream, a Labour group acting as a vehicle for Burnham’s leadership ambitions.
Former minister Miatta Fahnbulleh, a policy adviser to Burnham who is widely identified as the architect of his economic policies, described the paper as “an important contribution to the debate on how we solve this problem, deliver the change the public is crying out for, and begin rebuilding our broken economy.”
Lawrence stated that the paper envisions “a state that owns, invests, and provides to make life affordable; a politics that reclaims control over the essentials of a civilized life—clean water, cheap energy, warm homes, reliable transport—built and run by publicly accountable institutions.”
Subtitled “A Framework for Manchesterism,” the paper criticizes the long-standing trend toward the privatization of public services, arguing it lies at the heart of the UK’s growth and productivity crises by stripping away control over essential services and driving up the cost of living.
While neither the paper nor Burnham himself advocates for a wholesale renationalization program, they call for a framework of greater state intervention to protect the public from skyrocketing costs and the burden of bailing out failing private firms.
The Guardian previously reported that Burnham’s allies have discussed managing a 10-year project to bring large portions of England’s water and energy sectors under state control.
This process would likely begin with the struggling utility provider Thames Water.
Ultimately, Burnham’s allies want to bring energy transmission and supply companies, potentially including the electricity grid operator National Grid, under public control.
The paper outlines several pathways to achieving public control over the long term. For instance, if a company like Thames Water falls into financial distress, the government could intervene by implementing a “special administration regime.”
Burnham points to the Greater Manchester bus network as an example, where private operators bid for franchises to deliver services, but fares, timetables, and routes are controlled by local government.
For financially stable utility companies, the paper notes that the law typically requires the government to pay fair market value to acquire them.
To achieve this without a massive upfront cash expenditure, the paper suggests the state could use a “debt-for-equity swap” method, though it notes this would require primary legislation and likely face significant legal challenges.
Alternatively, the state could gradually assume control by establishing its own commercial public enterprises, though this path would potentially require large-scale borrowing.
While Burnham has stated a desire to prevent “excessive profiteering” in the sector, he has yet to detail exactly what a similar model would look like in practice for water and energy companies.
The Starmer government had already planned tighter regulation of the water sector through new legislation this autumn.
The paper has won praise from several prominent Labour figures, including Fahnbulleh and Stewart Wood, a Labour peer and former economic adviser to Ed Miliband.
Wood described the paper as “a valuable contribution to rethinking the social democratic case for a more active state that helps generate wealth and improve the quality of life across the country.”
Among the key commitments Burnham made during his Makerfield campaign was to stick to Labour’s pledge from the last election not to raise the main rates of income tax, VAT, and National Insurance.
During his campaign, he also indicated a desire to “look closely” at the possibility of raising the starting threshold for income tax, which is currently £12,570.
Burnham argues that housing policy has slipped too far down the priority list of successive governments. However, several of his signature policies—such as prioritizing development on brownfield land and restricting Right to Buy—have already been implemented by the current government.
According to the BBC, one of the biggest departures in Burnham’s advocated approach is to allocate the entirety of the 10-year, £39 billion affordable housing budget to social rent homes—the cheapest and most heavily subsidized form of publicly funded housing.
Like the Conservative administration under Rishi Sunak, Labour has reduced immigration levels by tightening visa requirements.
During his campaign in Makerfield, Burnham said that net migration “needs to come down further,” though he did not set a specific target.
On foreign policy, Burnham has expressed a desire to see the UK rejoin the EU within his lifetime, though he added that he has no wish to “re-run the 2016 referendum right now.”
His stance on relations with the EU will soon be tested. Among the legacies he would inherit from Starmer are a series of ongoing negotiations, particularly regarding youth visas, food regulations, and plans to link the UK back to the EU’s carbon pricing system.
Defence spending, which led to the resignation of Starmer’s Defence Secretary John Healey in early June, will be another key issue. While Burnham has stated he would “find more cash” than Starmer for defence spending, it remains unclear how he would achieve this.
Another significant challenge will be how Burnham manages relations with US President Donald Trump.
While Burnham has noted that the UK must seek “a good relationship” with the US, he has also stated that he would not shy away from saying “we don’t agree with them.”
At present, the selection of the new Chancellor of the Exchequer appears to be taking on particular importance. Two prominent names in contention are Wes Streeting and Ed Miliband.
Both Streeting and Burnham favor raising taxes on wealth rather than income. However, senior allies of Burnham expect Streeting—who has abandoned his own leadership ambitions—to be appointed to another senior cabinet post, amid rumors that he could become Foreign Secretary.
The Economist, emphasizing the need to tackle rising health and social care costs, adopt a pragmatic approach to the net-zero target, and cut red tape, has declared its preference: Wes Streeting.
Arguing that appointing Streeting would be “a sign of willingness to embrace growth,” the magazine is nevertheless not optimistic:
“The problem is that these policies run counter to Mr Burnham’s instincts, which are more aligned with those of Ed Miliband, another candidate for chancellor, who holds more statist views. Harnessing AI will require creative destruction; inefficient firms must be allowed to go bust, and workers must be able to move to jobs better suited to AI. Burnham seems instinctively opposed to the deregulation needed to achieve this. His allies, meanwhile, are demanding worker protections that are stronger even than those introduced by Sir Keir.”
Arguing that “such misconceptions” are visible elsewhere, The Economist contends that Burnham favors an “expensive state house-building programme” and wishes to reindustrialize the economy, which it describes as “a romantic notion that ignores the fact that Britain’s comparative advantage lies in services.”
Burnham, on the other hand, has not yet made a decision regarding the Treasury. Home Secretary Shabana Mahmood also remains in contention.
Senior members of Burnham’s team remain divided over whether to appoint Miliband to the post.
According to The Times, allies of Miliband, the Energy Secretary, argue that he is the only candidate with both the experience and the radical approach needed to transform Britain’s stagnant economy.
However, his critics, including some ministers, argue that he does not offer sufficient support to business and risks damaging market confidence.
They also point to his opposition to new oil and gas drilling licenses in the North Sea, an option Burnham has indicated he remains open to.
On the other hand, his appointment of James Purnell, a veteran of the former Tony Blair government, as his chief adviser is seen as a promising sign by The Economist and the Financial Times.
Flint Global, the advisory firm headed by Purnell, counts BP, Amazon, Jaguar Land Rover, and Uber among its clients.
Burnham is also expected to appoint Lord O’Neill, a former Goldman Sachs banker and Treasury minister, and Andy Haldane, the former chief economist of the Bank of England, to senior economic roles in his administration.
The most concise assessment of “Burnhamomics” comes from Jennifer Williams, who has closely followed Burnham for many years as the Financial Times Northern England correspondent:
“It is hard to escape the fact that when Burnham arrived in Greater Manchester, he took over a project that was already underway; he successfully sold this to loyal Labour supporters as a rejection of neoliberalism and trickle-down economics. Yet, it was never that.”
Europe
France launches Defence Quantum Campus to accelerate military technology integration
France has established a new Defence Quantum Campus designed to accelerate the adoption of quantum technologies across its military.
First announced in May and operational since June 1 in the suburbs of Paris, the campus serves as a centralized hub bringing together researchers, defense contractors, entrepreneurs, and investors.
“The core mission is to accelerate the operational deployment of quantum technologies within the armed forces,” Xavier Grison, General Armaments Engineer (IGA) and head of the campus, said in an interview with Euractiv.
Quantum technologies exploit the behavior of particles at atomic and subatomic scales, and are projected to transform fields ranging from computing and communications to sensing and navigation.
Defense-specific applications include post-quantum cryptography to secure communications against future quantum-enabled cyberattacks; advanced quantum sensors for GPS-independent navigation and enhanced detection; interception-resistant secure quantum communications; and quantum computing to rapidly simulate complex military scenarios, such as logistics, weapons systems performance, and weather forecasting.
The new campus operates with three primary objectives: strengthening ties with academic research, conducting in-house studies on defense-specific quantum use cases, and fostering closer relationships with industrial partners ranging from startups to major defense conglomerates.
A fourth pillar will focus on international cooperation.
France’s preferred partners in this technological domain will be countries within the European Union, which Grison described as the nation’s “natural circle of cooperation.”
Other nations, including Canada and Singapore, with which France already shares robust scientific and technological ties, will be evaluated on a case-by-case basis.
Grison noted that while the US remains an important partner, cooperation with Washington can prove more challenging.
“Preserving sovereignty and establishing a balanced partnership is more difficult,” Grison said, echoing broader European concerns regarding the maintenance of strategic autonomy in emerging technologies.
The campus will focus its efforts on three broad categories of quantum applications.
The most mature of these areas is quantum sensing, where systems are expected to significantly outperform conventional sensors.
“We have been working on this area for a very long time. We are confident that a portion of this research will yield concrete results,” Grison said.
Quantum computing represents the second major area of focus. While practical quantum computers capable of outperforming classical machines in useful tasks have yet to be proven, France maintains high expectations for the technology.
“We have identified five French companies utilizing five distinct technologies, all of which have a chance of success. The decision was made to mature all five. The goal is to reach a level of computational power by 2032 that surpasses even the most powerful conventional supercomputers.”
Grison identified quantum communication as the third category of focus for the campus, describing the field as currently being in a more “exploratory phase.”
Researchers hope that these systems will eventually overcome some of the physical limitations of traditional communication technologies, including those related to antenna usage.
For the Ministry of Armed Forces, the challenge lies not only in manufacturing hardware but also in developing software and identifying practical military applications.
Most of these potential applications will be dual-use in nature, offering utility to both the military and civilian sectors.
To help identify promising ideas, the campus has launched a “defense quantum hackathon” scheduled to take place in December.
A hackathon is an intensive innovation and coding marathon, typically lasting between 24 and 48 hours, in which software developers, designers, and subject-matter experts collaborate in teams to build innovative technical solutions to specific problems.
Participants in the event will receive training in quantum programming before being tasked with developing potential applications for the defense sector.
When asked what success would look like in ten years, Grison pointed to two key milestones: the emergence of a genuinely useful quantum computer and the deployment of an operational quantum sensor.
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