Structural pressure is reaching the security industry

German industry continues to lose ground in the eyes of its own companies. The challenge is particularly pronounced in markets outside the European Union: 25.4% of companies in Germany report that their competitive position has deteriorated there. For the security industry, this is more than a cyclical warning sign. Many of its core technologies depend on value chains spanning electronics, metal processing, mechanical engineering, chemicals and software – industrial ecosystems that are themselves coming under increasing pressure.

The results of the ifo Institute’s July 2026 Business Survey paint a clear picture. While roughly one in four companies reports a deterioration in its competitive position outside the EU, only 5.2% see an improvement. Pessimism also prevails in the European single market: 17% of companies report a weaker competitive position for German industrial products, compared with just 6.3% that see progress.

This creates a considerable gap between companies that are losing competitive strength and the relatively small group that is managing to improve its market position. Klaus Wohlrabe of the ifo Institute regards the problem as more than a temporary cyclical setback. According to the economist, the competitiveness problems facing German industry are structural in nature. A short-term economic recovery alone is therefore unlikely to reverse the trend.

Key industries supplying security technology are under pressure

The situation is particularly difficult in the automotive sector. Some 43% of companies in the industry report a deterioration in their competitive position on markets outside the EU. Metal production and processing follows at 29.1%, the chemical industry at 26%, and mechanical engineering at 25.5%. Among manufacturers of fabricated metal products, the figure is 25.3%, while 24.5% of electrical equipment manufacturers report a weaker competitive position.

These figures are highly relevant to the security industry. Electrical equipment, precision metal components, sensors, cables, enclosures, control systems and industrial manufacturing technologies form the physical foundation of a wide range of security solutions. They are essential to fire detection and intrusion alarm systems, access control, video surveillance, perimeter protection, and security-critical communications and energy infrastructure.

The ifo survey does not measure the security industry separately. Nevertheless, its findings indicate the pressure affecting many of the industrial suppliers and technology partners on which security providers depend. If these sectors continue to lose international competitiveness, providers of complex security systems may also feel the consequences through higher procurement costs, reduced economies of scale, greater dependence on non-European components and less financial scope for research and development.

Competitiveness in the security sector, however, is not simply a matter of price. Certification, interoperability, cyber resilience, long-term product support and reliable access to spare parts are equally important. Manufacturers must therefore reconcile cost-efficient production with increasingly demanding regulatory and technical requirements. The greater the pressure on Europe’s industrial cost base, the harder that balance becomes to maintain.

The European single market is no safe fallback

The assumption that weaker business in global markets can simply be offset by a strong position within Europe is also increasingly questionable. Companies are reporting competitive losses inside the EU as well. In the automotive industry, 24.8% report a deterioration in their position in the European market; in the chemical sector, the figure is 22.1%.

For German security companies, this development has strategic implications. Europe is not only a major sales market. It is also an important reference market for regulated, trusted and technologically sophisticated security solutions. If competitive pressure intensifies even in this home market, margins, investment capacity and the broader industrial base may all come under strain.

This also exposes a fundamental tension in Europe’s industrial strategy. The EU aims to become more resilient and less dependent on third countries in critical technologies. Yet technological sovereignty requires competitive manufacturers, robust supply chains and sufficient production capacity.

Resilience cannot be created permanently through regulation, certification requirements or procurement criteria alone. It requires an industrial base capable of financing innovation, scaling technologies and competing successfully in international markets.

Security is becoming a competitiveness factor – but not automatically a growth guarantee

The current environment nevertheless creates opportunities for the security sector. As companies and public authorities invest more heavily in protecting supply chains, production facilities, data, buildings and critical infrastructure, demand for integrated security concepts is likely to increase. Geopolitical uncertainty, cyberattacks and the growing risk of sabotage may reinforce this trend.

Security is therefore increasingly being treated not simply as a cost item, but as a prerequisite for operational continuity and economic resilience.

Yet greater demand for security does not automatically translate into commercial success for German or European suppliers. When investment budgets come under pressure, industrial companies may postpone modernisation projects or reduce them to the minimum required for regulatory compliance. At the same time, European manufacturers compete with international providers that may benefit from larger economies of scale, lower production costs or easier access to capital.

This raises the importance of differentiation. The strongest market position is likely to be achieved by solutions that combine measurable security benefits with a clear business case: open system architectures, lower lifecycle costs, demonstrable cyber resilience, automated situational awareness and closer integration between physical and digital security.

Providers that continue to position security technology as an isolated product category may find themselves at a disadvantage compared with companies that integrate security into the resilience of business and production processes.

Industrial policy and security strategy must converge

The ifo findings underline that the debate over competitiveness cannot be limited to energy prices, taxation and bureaucracy. For the security industry, other factors are equally important: predictable regulatory frameworks, faster approval and certification procedures, modern digital infrastructure, skilled personnel and procurement policies that support innovation.

Public-sector customers can contribute to European technological sovereignty by evaluating not only the initial purchase price, but also lifecycle costs, software and firmware update capabilities, supply-chain transparency and compliance with European security requirements.

Companies themselves also have work to do. They need to diversify supply chains, identify critical dependencies and shorten development cycles. Closer cooperation between hardware manufacturers, software providers, systems integrators and operators could help compensate for disadvantages of scale and bring integrated solutions to market more rapidly.

One notable exception in the ifo survey is the beverage industry. It was the only sector to report an improvement in its competitive position both within and outside the EU. The finding illustrates that the broader industrial downturn is not inevitable – but it is widespread.

For the security industry, the conclusion is twofold. It must safeguard its own international competitiveness while simultaneously helping other industries become more resilient. The two objectives are closely connected.

A strong security industry does more than protect facilities, information and infrastructure. It is itself a strategic component of Europe’s economic resilience, technological sovereignty and capacity to act.

Source of survey data: ifo Institute, “Jedes vierte Unternehmen fürchtet um seine Wettbewerbsfähigkeit” (“One in Four Companies Fears Losing Competitiveness”), 19 August 2026. The analysis relating specifically to the security industry represents an editorial assessment based on the published sector data.