German mid-sized firms delay investments amid economic uncertainty
KfW research reveals that while German SMEs remain financially resilient, high costs and regulatory hurdles are stalling critical investment activity.
German mid-sized enterprises, known as the 'Mittelstand,' are demonstrating financial resilience despite a challenging macroeconomic environment. According to the 2026 KfW Mittelstandspanel, nominal revenues for the sector grew by 1.5% to 5.3 trillion euros in 2025, representing a real-term decline of 1.5% when adjusted for inflation. Profitability improved, with margins rising to an average of 7.5%, reaching pre-pandemic levels.
Despite a strong average equity ratio of 30.7%, investment activity remains sluggish. Dr. Dirk Schumacher, Chief Economist at KfW, noted that while companies possess the financial means to invest in digitalization and climate transitions, many are actively postponing projects. In 2025, only 40% of the approximately 3.9 million SMEs surveyed carried out planned investments.
Companies cited high energy, material, and labor costs, alongside bureaucratic burdens and economic uncertainty, as primary barriers to investment. Furthermore, there is a persistent reluctance to take on bank debt, with only a small fraction of firms engaging in credit negotiations.
The findings underscore a potential risk for the German economy, as the lack of investment in modernization and innovation could hinder long-term growth. The KfW study, which surveyed over 10,000 businesses, highlights the current discrepancy between the sector's financial stability and its cautious corporate behavior.