The German industrial Mittelstand with its many family businesses is both an anchor of stability and a driver of innovation, even in times of economic upheaval. The Corona crisis has once again demonstrated the importance of a strong industrial core for the economy’s resilience. Germany’s model of success relies on the diverse corporate structures of small, medium-sized and large listed companies across sectors and regions. In complex value-added networks, their diverse capabilities complement each other in the best possible way.
However, in addition to strong international competitiveness, Mittelstand companies face home-made burdens that need to be addressed.
Creating a favourable and conducive business environment across all German regions
Germany has always been an innovative country. To ensure that it stays that way, research and development should be promoted and the conditions for industrial start-ups should be improved. This entails securing access to financing and attracting skilled workers from abroad. In view of more equivalent living conditions in Germany, rural regions need to be strengthened: an attractive business environment in the countryside needs adequate access to urban areas in order to retain Mittelstand companies as well as their investments and jobs at the local level.
Increasing the scope for investment and lifting the bureaucratic burden
Giving SMEs more scope for investments can also be achieved by reducing electricity costs, by modernizing the tax system, by permanently limiting social security contribution rates and by raising the statutory retirement age in the foreseeable future. Additionally, it is up to the next government to improve the regulatory quality, to speed up planning and approval procedures and to reduce the bureaucratic burden. Providing comprehensive e-government tools, for example, could go a long way in doing so.
Fostering the inclusiveness of Mittelstand companies in global value chains
Globalization and international trade have created unprecedented opportunities for German industrial SMEs as they are often highly export-oriented. Open borders in the EU single market and worldwide as well as unbureaucratic customs procedures are prerequisites for smooth foreign trade with low transaction costs. Advancing digitalisation across the board, from smart data policies to the expansion of fiber-optic networks, is another key to efficient cross-border supply chains.
It will be the new government’s task to enable an environment in which the entrepreneurial spirit of Mittelstand companies can continue to flourish.