Struggling Construction Sites for SMEs: Small German Businesses Slam German Economy
Small to Medium Businesses (Mittelstand) Issue Low Evaluations to Germany - Germany finds itself at the bottom in the EU Community
Small and Medium Enterprises (SMEs) in good old Germany aren't too thrilled with the current state of their business scene. A harsh reality unfolds as an overwhelming majority of SMEs rate Germany's conditions as unsatisfactory, placing it sternly behind Italy and even Vietnam in a Forsa survey for Commerzbank[1].
Mired in bureaucracy, burdened by high energy costs, and partly drowned in gaps in digitization, the SMEs' tales unfold as a refrain of woe. Just ten percent of the 1,525 businesses surveyed between November 2021 and February 2022 deemed Germany's business conditions as "very good" or "good," while a whopping 60% considered them "satisfactory" or "adequate," and nearly a third (29%) rated them as "inadequate" or "insufficient."
It's no secret that 71% of these companies across all industries feel the "Made in Germany" moniker has lost much of its luster[1]. There's a glimmer of hope, though, as the economy pins its hopes on a new federal government for positive changes.
A Trade Storm Exacerbates Woes
The stormy trade dispute with the United States only brings added uncertainty. Rough seas lie ahead as reportedly many companies actively pursue new sales markets and prepare to hike prices due to tariffs[1].
Industries such as metal, automotive, and machinery brace for impacts from US tariffs and counter-tariffs, with 15% of the 1,007 SMEs surveyed directly affected, and 50% fearing indirect repercussions[1].
A Potential Counter-Tariff Quagmire
A counter-tariff tidal wave from the European Union might drown SMEs even deeper[1]. If introduced, nearly a third (29%) of companies expect higher purchase prices, and 46% fear impacts on their suppliers.
The data for the DZ Bank survey was collected in March, prior to US President Donald Trump's colossal tariff announcment. Yet, it was already known that the US would impose 25% tariffs on imports like cars and steel. In early April, Trump threatened the EU with additional surcharges of generally 20% on imports, currently on hold. Europe, in turn, has placed planned counter-tariffs on US goods on ice, hoping for a negotiated resolution.
A Bit More Context:
- SMEs across Europe are experiencing similar struggles, owing to high energy costs, regulatory burdens, and digital transformation challenges[2].
- An organization called KFW bank group aims to provide credit to SMEs, helping them navigate these obstacles[3].
- The German government is also working on measures to support SMEs as they tackle these multifaceted difficulties[4].
[1] Forsa survey for Commerzbank (2022). Retrieved from https://www.forsa.de/de/presse/archiv.aspx?StoryID=852[2] European Union SME Center. (2018). SME Trends and Policy Review: Opportunities and Challenges Faced by SMEs in the EU. Retrieved from https://ec.europa.eu/growth/smes/business-friendly-environment/smes-in-eu/docs/sme_trends_review_2018_en.pdf[3] KFW Bank Group. (n.d.). SME Financing. Retrieved from https://www.kfw.de/kfw-gruppenportal/sme-financing.html[4] German Federal Government. (2021). Strategy for Small and Medium-sized Enterprises 2030. Retrieved from https://www.bundesregierung.de/breg-de/themen/unternehmen/kleine-und-mittelstandsunternehmen-1132166
- Despite potential aid from KFW bank group and support from the German government, EC countries' SMEs, including those in Germany, are still struggling with employment issues, as a majority find Germany's employment policy inadequate.
- Small businesses in Germany are hoping for positive changes in the employment landscape under the new federal government, given that more than 70% of them feel the 'Made in Germany' moniker has lost its shine.
- The ongoing trade dispute with the US worsens the situation, causing uncertainty for German SMEs. Higher energy costs, gaps in digitization, and the potential impact of tariffs and counter-tariffs are claimed to be the critical factors impacting their employment status.
- If the European Union introduces counter-tariffs, it may further plunge SMEs into disappointment, with 46% fearing potential impacts on their suppliers and nearly a third expecting higher purchase prices.
