SMEs in Germany post higher profitability in spite of challenges

FRANKFURT, Oct. 23 (Xinhua) -- Small- and Medium-Sized Enterprises (SMEs) in Germany turned out to be resilient and posted modest growth of profitability in 2025 in spite of prevailing challenges, a study published on Thursday showed.

This photo taken on Nov. 8, 2023 shows autumn scenery along the river Main in Frankfurt, Germany. (Photo: Xinhua)

German SMEs generated an aggravate turnover of 5.3 trillion euros (about 5.9 trillion U.S. dollars) in 2025, up by 1.5 percent year-on-year and profit margins climbed by 0.5 percentage points to 7.5 percent on average, according to the result of a survey conducted by the KfW Development Bank.

The result is a sign that the German SMEs are "well-positioned" to drive forward the economic recovery in the country, said the bank in a press release.

The findings of the survey also showed that German SMEs in 2025 became more resilient financially to buffer potential shockwaves with improved equity ratio. The share of SMEs with equity ratio higher than 30 percent grew by 1.5 percentage points to more than 51 percent while the share of SMEs with equity ratio below ten percent fell under 24 percent from over 28 percent in 2024.

The strong financial position should, according to Dirk Schumacher, chief economist of KfW, enable them to invest in the future.

Nonetheless, the survey pointed to a reluctance of SMEs to invest, as half of the SMEs invested no more than 5.4 percent of their turnover in their business in 2025 due to high energy and material prices and higher wage burdens.

To sum up the challenges German SMEs are faced up with, a report published by a British consulting company RSM Ebner Stolz concluded that "the economic conditions facing Germany's SME sector have changed fundamentally in recent years."

The global geopolitical tensions tighten and U.S. trade policies became erratic, weighing on the exports on which German SMEs relied on heavily. Meanwhile, surging energy prices and declined competitiveness have eroded the attractiveness of Germany as a destination of investment.

German SMEs are hit "particularly hard", said the "SME Diagnosis 2025" report published by the German Savings Banks Association.

The German SMEs are at "a turning point" and transformation and international business have become decisive for long-term competitiveness, said the report.