GBP Monitor: War in the Middle East Weighs on German Companies – Hidden Reserves Dwindling, Tax Cuts Even More Important than Energy Cost Subsidies
The hidden reserves of German companies are noticeably shrinking. In February, around one in three companies was still able to build up reserves through profit-reducing accounting policies – since then, this share has halved. A key factor has been the escalation in the Middle East, which has further intensified economic pressures. Rising energy prices and disrupted supply chains are increasing cost pressures for companies. Almost 70 percent of the companies affected are responding with price increases, while 35 percent are planning cuts to fixed costs, particularly through layoffs. At the same time, expectations toward policymakers are rising: Companies identify substantial tax cuts as the most important structural reform – even ahead of energy cost subsidies. This is shown by a recent study by the German Business Panel.
Press Release from 28 April 2026
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The ongoing military escalation in the Middle East is increasingly having global economic repercussions. Since the end of February, the military confrontation between the United States, Israel, and Iran has expanded into a broader regional conflict. At the latest with the closure of the key shipping route through the Strait of Hormuz, energy prices have risen significantly and international supply chains have been severely disrupted. A short-term easing of tensions is not currently in sight, despite ongoing peace negotiations.
The effects are also being felt in Germany. This is shown by the latest GBP Monitor from April 2026: Almost every second company (49.6 percent) already reports financial burdens as a result of the conflict. The main causes are sharply rising energy costs (72.8 percent), increasing planning uncertainty (39.0 percent), and disrupted supply chains (22.8 percent).
Cost pressures rise – financial buffers are shrinking
The financial burdens are increasingly accompanied by a reduction in hidden reserves. While companies deliberately used accounting leeway before the war to build financial buffers, this has become significantly more constrained under current conditions. The share of companies using profit-reducing accounting policies has fallen from 33.8 percent to 18.1 percent since the start of the war. “This is a clear sign that companies’ financial leeway is diminishing and their ability to respond to further pressures is declining. This could have prolonged negative effects on investment decisions and employment,” explains Professor Jannis Bischof, academic project manager of the German Business Panel.
Rising price and cost pressures are already leading to significant real-economy adjustments. 68 percent of companies plan to raise their prices over the next 12 months. How strongly prices will ultimately increase depends crucially on the duration of the conflict. If the current peace negotiations fail and the war lasts longer than six months, companies in Germany expect their selling prices to increase by an average of 9.9 percent. “High inflation is placing a burden on companies and households in an environment that already features very weak growth prospects. This war is catastrophic, including for Germany,” says Professor Davud Rostam-Afschar, project manager of the German Business Panel.
Companies plan cutbacks and call for structural reforms
To safeguard their liquidity, many companies are also responding with cost-cutting measures: 46.1 percent intend to reduce dividend payouts, 38.5 percent are planning lower bonus payments, and 34.6 percent aim to cut fixed costs, particularly through layoffs. It is also alarming that nearly one in five companies (19.7 percent) is considering cuts to research and development. This could jeopardize the long-term innovative capacity of the German economy.
Accordingly, companies’ demands toward policymakers are clear: In addition to short-term relief on energy costs, companies are above all calling for structural relief – in particular through tax cuts (60.5 percent). “The results show that the war against Iran is not only triggering short-term crisis support measures, but is also intensifying the already existing pressure for reform in German economic policy. Companies are calling for relief on energy costs, but above all for better framework conditions,” says Rostam-Afschar.
Relief from documentation and reporting obligations is also meeting with even greater approval among companies than before. The EU’s Omnibus Initiative, which aims to reduce bureaucracy by lowering reporting and documentation requirements in the area of sustainability, has been viewed more favorably since the outbreak of the war than before (65 percent compared to 57 percent). “The growing support for the Omnibus Initiative shows that, under sustained economic pressure, sustainability requirements are losing priority. Companies that are currently struggling to maintain liquidity are postponing their agendas. The rising support for the Omnibus reform is not a rejection of sustainability, but rather a symptom of economic strain,” says Bischof.
The complete report on company trends in April 2026 (“GBP-Monitor: Unternehmenstrends im April 2026”) can be found here: https://www.accounting-for-transparency.de/wp-content/uploads/2026/04/gbp_monitor_april_2026.pdf
Contact:
Prof. Dr. Jannis Bischof
Chair of Business Administration and Accounting
University of Mannheim
E-Mail: jbischofuni-mannheim.de
Prof. Dr. Davud Rostam-Afschar
Professor for Accounting
University of Mannheim
E-Mail: rostam-afscharuni-mannheim.de
Luisa Gebhardt
Press Officer
University of Mannheim
E-Mail: luisa.gebhardtuni-mannheim.de