German SMEs Increase Digitalization Investments
The share of German small and medium-sized enterprises (SMEs) undertaking digitalization projects rose to 35 percent between 2021 and 2023. Investments grew, but the gap between large and small firms widened.
Berlin – German small and medium-sized enterprises (SMEs) are increasingly investing in digitalization. Between 2021 and 2023, 35 percent of these companies implemented digitalization projects, a five percentage point increase compared to the pre-pandemic period. This means approximately 1.3 million German SMEs have undertaken digital initiatives.
This marks the second consecutive measurement period showing an increase in the proportion of companies engaging in digitalization. According to the KfW Research Mittelstandspanel study, this trend is notable because companies typically undertake digitalization measures during favorable economic conditions. The study suggests that many firms perceive digitalization as essential due to lasting shifts in demand favoring digital offerings and sales channels.
In 2023, German SMEs spent 31.9 billion euros on digitalization projects. While this represents an increase from the previous year, digital expenditures remain significantly lower than traditional investments, which amounted to 250 billion euros.
The research also highlights a significant disparity in digitalization efforts based on company size. Large SMEs, defined as having 50 or more employees, constitute only 2 percent of all SMEs but account for 41 percent of all digitalization investments. Small companies with fewer than five employees, representing 81 percent of all SMEs, invested only 4 billion euros in digital projects.
KfW Research warns that large SMEs have continuously widened their lead in digitalization. Small companies risk falling behind if they do not substantially increase their digital activities. In 2023, small firms spent an average of 8,000 euros on digitalization, while large firms spent an average of 216,000 euros.