German Mittelstand faces declining export revenues amid geopolitical pressure

A study by KfW Research indicates that German small and medium-sized enterprises (Mittelstand) are facing significant shifts in their international business operations due to geopolitical conflicts, trade uncertainties, and increasing competition from China.

Approximately 30 percent of German companies with international sales expect their cross-border revenues to decline over the next three years, with 6 percent anticipating a sharp decrease. While 47 percent expect no change and nearly a quarter anticipate growth, many firms are actively diversifying their export markets to mitigate risks.

The manufacturing sector, which accounts for roughly 43 percent of total Mittelstand international turnover, is experiencing particularly high pressure to adapt. Notably, there is a rising trend of companies relocating operations abroad; while only 4 percent of internationalized companies relocated in the previous five years, 12 percent plan to do so over the next five years. The study suggests that improving domestic conditions is necessary to counter potential deindustrialization.