Survey: German SMEs hold back investment amid economic uncertainty

Small and medium-sized enterprises in Germany continue to struggle with investment, with just 40% of the country's 3.9 million SMEs carrying out investment projects in 2025, according to an analysis released on Thursday by state development bank KfW.

Known in Germany as the Mittelstand, these businesses are regarded as the backbone of Europe's largest economy, accounting for a large share of employment and economic activity.

Their situation has remained difficult this year, with a record 33% of companies saying they had postponed or scaled back investments planned for 2026, according to the KfW survey of firms conducted in September.

Many companies have the financial resources to invest in digitalization, new equipment and energy efficiency but are holding back, said KfW chief economist Dirk Schumacher.

"The bad news is that too many companies are still not investing at all or are investing too little. They are postponing investment projects. This is a problem for Germany as a business location," Schumacher said.

High energy costs and bureaucracy hamper investment

Germany's SMEs invested around €218 billion ($244 billion) in new equipment and buildings in 2025, down €3 billion from the previous year, according to the analysis.

Adjusted for inflation, the volume of new investment declined for the third consecutive year, KfW calculated.

Between 2019 and 2025, business investment in Germany fell by 8.3% after adjusting for prices and calendar effects.

Companies cited high energy, material and labour costs as the biggest obstacles to investment in the September survey.

Uncertainty about the economic outlook and excessive bureaucracy were also holding back investment, the survey found.