Investment appetite among small and medium-sized enterprises hits all-time low

• Bureaucracy remains the biggest problem; energy and raw material costs are rising significantly
• Supply bottlenecks are on the rise again: 31 percent of companies are affected. At the same time, 43 percent are planning price increases
• Despite rising costs, a slim majority of small and medium-sized enterprises plan to hire new staff
• International expansion continues: 54 percent of SMEs are now active abroad
• Financial statement quality at its lowest level since 2012

Investment appetite among German SMEs has fallen to its lowest level since the survey began in 1995—lower than during the financial crisis, the COVID-19 pandemic, or the energy crisis following the start of the war in Ukraine. Only 52 percent of companies still plan to invest in their operations over the next six months. This is shown by the latest SME survey conducted by DZ BANK and the Federal Association of German Volksbanks and Raiffeisenbanks (BVR), for which more than 1,000 SMEs in Germany were surveyed. Compared to the fall 2025 survey, business expectations are stagnating at a low level. Only 26 percent anticipate an improved business situation in the coming six months. Twenty percent even expect conditions to worsen.

The strained economic environment is exacerbating the situation for small and medium-sized enterprises: The burden of energy, raw material, and supply costs has continued to rise significantly over the past six months. Sixty-seven percent of companies view energy costs as a problem (Fall 2025: 53 percent), and 57 percent view raw material and supply costs as a problem (Fall 2025: 43 percent). Companies are once again increasingly confronted with supply bottlenecks. Concerns about product shortages or delayed deliveries rose by 13 percentage points over the past six months to 31 percent (Fall 2025: 18 percent). Cost pressures are reflected in pricing expectations: 43 percent of small and medium-sized enterprises plan to raise prices, while just under 5 percent expect prices to fall. This means more companies intend to raise their prices than six months ago—at that time, the figure was 34 percent, while 9 percent planned to lower them.While the domestic economy remains weak, companies are seeking new sales channels abroad. Just under 54 percent of the SMEs surveyed are active abroad. That is 10 percentage points more than in the spring of 2024.

“The all-time low in willingness to invest is a warning sign for our country’s competitiveness,” says Stefan Beismann, Chief Executive for Corporate Clients at DZ BANK. “Many small and medium-sized enterprises are currently struggling simultaneously with weak demand, rising costs, and high geopolitical uncertainty. In such a situation, companies are focusing more on liquidity, cost control, and securing their supply chains. Investments in Germany are currently focused primarily on safeguarding existing operations. Growth and expansion, on the other hand, are increasingly taking place abroad. Exceptions are business sectors where the ongoing transformation is already driving growing demand—such as infrastructure for the energy and heating transition, the defense sector, and digitalization and AI.”

Politicians must create space for private investment

“The significantly deteriorated balance sheet quality of small and medium-sized enterprises (SMEs) also reflects the poor economic situation in Germany. Companies are drawing down their reserves, suffering from high costs, and refraining from investments. Many companies and skilled workers are moving abroad. Yet it is precisely now that important decisions for the future must be made. AI investments, in particular, have the potential to significantly boost business competitiveness and profitability,” says Marija Kolak, President of the BVR. “With its reform package, the federal government is taking long-overdue, appropriate steps to facilitate investment and reduce bureaucracy. However, the governing coalition’s tax policy decisions are disappointing. The planned income tax relief does not even offset bracket creep. The change to the top tax rate will burden small and medium-sized enterprises rather than relieve them. There is no question of a far-reaching tax reform. Policymakers must urgently make improvements here. Overall, the priority now is to swiftly translate these political decisions into a consistent reform package that actually creates more room for private investment.”

Costs Are Back in the Spotlight

Bureaucracy remains the biggest problem for small and medium-sized enterprises: 74 percent of the companies surveyed cite it as a major burden. Although this figure is lower than in the fall of 2025 (80 percent), it remains at a high level.Concerns about energy, raw material, and supply costs have moved into second and third place among the current problem areas. They have thus overtaken the shortage of skilled workers (56 percent) and labor costs (53 percent), which were perceived as particularly problematic in the past two surveys. Energy costs are even the most pressing current issue, particularly for small and medium-sized enterprises in the chemical industry (82 percent). In the agricultural sector (80 percent) and the food industry (76 percent), they are on par with the burden of bureaucracy.

Supply bottlenecks and price increases are on the rise

Companies in the electrical industry as well as in the chemical and plastics sectors, in particular, view supply bottlenecks as a challenge. In both sectors, roughly one in two companies is affected. The situation regarding the procurement of materials was most recently even more strained during the major supply chain crisis of 2022–2023—in the electrical industry in the spring of 2023, and in the chemical and plastics sectors in the fall of 2022.Price increases are planned across all industries, with the construction sector seeing the sharpest rise. The share of construction companies planning to raise their prices in the coming six months has risen by 25 percentage points since fall 2025 to 63 percent. At the same time, the number of companies planning to lower their prices during this period has halved, from 8 to 4 percent.

Mixed Picture of Current Conditions and Expectations

Despite the multitude of headwinds, the assessment of the current business situation among small and medium-sized enterprises has improved for the second time in a row. 71 percent of companies rate their current business situation as “very good” or “good.” However, 29 percent of respondents continue to rate their situation as “somewhat poor” or “poor.” Sentiment remains particularly gloomy in the agricultural sector, where 45 percent rate the situation as “bad” or “somewhat bad,” as well as in the metal, automotive, and mechanical engineering sectors (34 percent). In addition to the assessment of the business situation, employment expectations are also slightly positive. Sixteen percent of small and medium-sized enterprises plan to expand their workforce; 11 percent intend to cut jobs. Thus, despite increased cost pressures, the majority of small and medium-sized enterprises still intend to moderately expand their workforce. Expectations for the coming six months, on the other hand, are virtually stagnant. There are significant differences between the various sectors. Expectations have declined noticeably, particularly in retail, the chemical industry, and agriculture. In the retail sector, 23 percent expect the situation to be “somewhat worse,” and 5 percent even anticipate a “sharp deterioration.” In the agricultural sector as well, the proportion expecting a sharp deterioration is high at 8 percent—with an additional 17 percent anticipating a moderate deterioration. In the chemical sector, 25 percent of the companies surveyed also expressed moderate or significant pessimism regarding their business expectations. “The current business situation is benefiting from an improved order situation and higher order backlogs in recent months,” says Beismann. “This explains why companies are assessing their current situation more positively. Looking ahead, however, caution prevails—the high level of uncertainty and rising costs resulting from the Middle East crisis are reflected above all in reluctance to invest. The fact that small and medium-sized enterprises are expanding their workforce in this complex situation is likely due primarily to the baby boomer generation reaching retirement age. In doing so, companies are benefiting in particular from a labor market that is currently more favorable to employers.”

Balance Sheet Quality Deteriorates Significantly

The ongoing period of macroeconomic weakness had a noticeable impact on the balance sheets of small and medium-sized enterprises in 2025. According to initial preliminary calculations, the balance sheet quality index fell by 10.4 points to 114.3 points, reaching its lowest level since 2012.The primary factors behind this were the equity ratio and the dynamic debt ratio, which together accounted for just over three-quarters of the decline. The average equity ratio fell by 4.2 percentage points to 26.5 percent, after having reached a peak of 30.7 percent in 2024. This ratio deteriorated particularly in the construction and retail sectors.The dynamic debt ratio, which reflects companies’ ability to repay debt, also deteriorated significantly. It rose by 43.6 percentage points to 364.5 percent, primarily due to an increase in debt financing amid virtually stagnant cash flow. This ratio is the only component of the overall index where higher values indicate a deterioration in balance sheet quality.

Artificial Intelligence Significantly More Widespread Among SMEs

In addition to the economic situation, the study also examines the use of digital technologies. The use of artificial intelligence has risen particularly sharply: While only 8 percent of SMEs used AI in 2018, that figure has now risen to 58 percent. This puts AI nearly on par with the Internet of Things, which is also used by 58 percent of companies. About one in six SMEs still does not use any of the digital technologies surveyed.