FACT CHECK | MITTELSTAND & FAMILY BUSINESSES
The German Mittelstand Data, numbers, facts
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BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Table of contents
Table of contents Preface .................................................................................................................................................................................... 5 Corporate character and economic significance ............................................................................................... 6 Can the German SME sector be captured by a single definition? ................................................................. 6 Can German SMEs be a blueprint for other countries? .................................................................................... 7 Does the SME sector shape the economy and society? .................................................................................. 8 Are family businesses a key characteristic of the German Mittelstand? ..................................................... 9 Are large listed companies and SMEs a contradiction in terms? ................................................................. 10 Is the success of the German Mittelstand a foregone conclusion? ............................................................ 11 Social significance ........................................................................................................................................................... Do SMEs make an active contribution to the German education system? .............................................. Does the SME sector contribute to social cohesion? ...................................................................................... Is local cultural sponsorhip an important aspect of SME culture? ..............................................................
12 12 13 14
Taxes ...................................................................................................................................................................................... 15 Is successful business succession in SMEs a social challenge? ................................................................. 15 Is the German tax environment SME-friendly? ................................................................................................... 16 Funding ................................................................................................................................................................................. 17 Are Mittelstand companies financially independent and self-reliant? ........................................................ 17 Are financing requirements for SMEs becoming stricter and more complex? ........................................ 20 Bureaucracy ....................................................................................................................................................................... 21 Do bureaucracy costs harm Germany as a business location? ................................................................... 21 Do inefficient administrations affect business investment? ........................................................................... 22 Do disclosure requirements go hand in hand with more and more transparency of company data? 23 Mobility, transport, logistics ........................................................................................................................................ 24 Do Mittelstand companies in rural areas find efficient transport infrastructure? .................................... 24 Labor market ...................................................................................................................................................................... 25 Is the SME sector suffering from an increasing shortage of qualified workers? ..................................... 25 Digitalisation and innovation ...................................................................................................................................... Are SMEs driving research, development and innovation? ............................................................................ Can SMEs take the digitalisation for granted? ................................................................................................... Are traditional Mittelstand companies and young start-ups a contradiction in terms? .......................
26 26 27 28
Energy, climate, environment ..................................................................................................................................... 29 Are German energy policies SME-friendly? ......................................................................................................... 29 Are the government’s environmental targets geared to the everyday business of SMEs? ................. 30 Foreign Trade ..................................................................................................................................................................... 31 What do SMEs think of open borders? ................................................................................................................. 31 References .......................................................................................................................................................................... 32 Imprint ................................................................................................................................................................................... 34
3
Dr.-Ing. Hans-Toni Junius “We SMEs show what long-term entrepreneurial perspective and sustainable business mean: smart investments, constant innovation and international competitiveness. This creates job security and local prosperity.”
CEO and Chairman of the Management Board C.D. Wälzholz GmbH & Co. KG Chairman BDI/BDA SME Committee
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Preface
Preface Economically, Germany has a model of success that is the envy of the world: the Mittelstand with its numerous family-owned companies. Ownership and control as well as leadership and responsibility are often combined in the best possible way in a cross-generational perspective. Creators, tinkerers and visionaries point the way forward with entrepreneurial spirit, inventiveness, reliability, patience, discipline and a sense of proportion. They position themselves in value-creating networks that bring together small, medium-sized and large listed companies. These Mittelstand companies, that often have deep ties with their local communities, offer innovative systems, a wide range of products and suitable services. They develop solutions, which are in demand worldwide, but which are mostly developed, implemented and first used here in Germany. Anyone who recognizes the special quality of SMEs and family businesses should take at least three things into account: 1. The most important goal in family businesses is to ensure that the company is well positioned to be passed on to the next generation. Political decisions must promote smooth business succession in terms of organization and taxation, also with a view to growth and employment in Germany.
Mittelstand— one phenomenon, many names SME Family businesses Backbone of industry Engine of the economy Hidden Champions
2. Many small and medium-sized enterprises have been located in rural regions – often for generations. Locally, they assume responsibility for society and the economy. They provide training and jobs. Reliable connections to metropolitan areas must be ensured, especially through efficient transportation and digital infrastructures. 3. SMEs are successfully engaged in trade and investment in Europe and on the global market. This competitiveness can only be maintained with modern investment and free trade agreements, reliable double taxation agreements and efficient customs and export control procedures. Much more could be mentioned, much more needs to be done. In any case, clear strategies are needed to shape the future – in companies and politics alike. Every good strategy requires a sober view of reality, a good understanding of the facts and an evaluation of options. That’s exactly what this fact check is for.
Dr.-Ing. Hans-Toni Junius
Holger Lösch
Chairman of the BDI/BDA SME Committee
Deputy Director General BDI
5
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Corporate character and economic significance
Corporate character and economic significance Can the German SME sector be captured by a single definition?
.
There are various definitions of small and medium-sized enterprises (SMEs). According to the EU, SMEs have up to 250 employees and an annual turnover not exceeding €50 million, and/or an annual balance sheet total not exceeding €43 million.
.
At the same time, the defining qualitative features such as the company’s economic and legal independence and the combination of ownership, control and leadership are not taken into account.
.
As the Institut für Mittelstandsforschung (IfM) Bonn shows, numerous companies that do not meet the criteria of the European SME definition still define themselves as Mittelstand. These are in particular the so-called mid-caps.
Share of self-defined Mittelstand companies is larger than the objective definition reveals Source: IfM Bonn (2015) 65.3
in percent
77.1 88.1
Micro 40.4 74.2
Small
79.8 56.5
Medium
96.0
Large
40.5 91.0
Definitorial Mittelstand: Up to two natural persons or their family members (directly or indirectly) hold at least 50% of the company's shares. In addition, these natural persons must be members of the management. Self-defined Mittelstand: The company is defined as Mittelstand by the management, independent of the company's ownership structure.
SME definition of the IfM Bonn Company size micro small medium (SMEs) together
6
Number of employees up to 9 10 – 49 50 – 499 up to 499
Turnover €/year up to 2 million up to 10 million up to 50 million up to 50 million
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Corporate character and economic significance
Can German SMEs be a blueprint for other countries?
.
An attractive and reliable business and regulatory environment as well as qualified specialists are key prerequisites for a successful SME sector. These conditions can be met in several countries. What makes German Mittelstand companies special has grown historically.
.
The special character of the German Mittelstand has developed thanks to the many family businesses. Their entrepreneurial activities rely on independence and a high level of social commitment in their local communities. Economic activities are sustainable as they have the next generation in the family business in mind.
.
The average number of employees is relatively higher in the German SME sector than in other EU countries as the relatively larger industrial (family-owned) companies dominate the sector. Almost half of the approximately 2700 hidden champions worldwide are based in Germany.
Average number of employees per SME by EU country Source: IfM Bonn (2018a)
7.6
5.9 5.5 5.1
5.1 4.4 3.9
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3.1
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3.1
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3.5
7
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Corporate character and economic significance
Does the SME sector shape the economy and society?
.
The approximately 3.5 million Mittelstand companies account for around 99.5 percent of all companies in Germany. Companies with fewer than 500 employees generate more than one third of the total turnover of German companies.
.
They have a decisive impact on the economy and society and are key drivers of research, development and innovation. Moreover, with an average of €67 billion in corporate taxes per year between 2010 and 2018, family businesses generate almost half of this revenue in Germany (ifo Institute Munich 2020).
.
SMEs and family-owned businesses contribute to sustainable job growth. Almost 60 percent of all employees subject to social security contributions find work and income in Mittelstand companies of this size.
Economic significance of small and medium-sized enterprises in Germany Source: IfM Bonn (2018b)
in percent
Companies
Turnover
Employees subject to social security contributions
99.5
34.4
57.6
Shares of employees subject to social security contributions by company size in percent 2018
12.9 Micro
8
18.5 Small
26.1 Medium
42.4 Large
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Corporate character and economic significance
Are family businesses a key characteristic of the German Mittelstand?
. .
More than 90 percent of all companies in Germany are – in one way or another – owned by families. Family businesses operate in a special way – sustainably, patiently and independently. Shareholders and capital are typically closely linked. Many companies are world market leaders in technological niches.
.
Germany’s 500 largest family businesses created more domestic jobs than the 27 not family-owned DAX companies between 2007 and 2016.
Development of domestic employment of the largest 500 family businesses and DAX companies Source: ZEW Mannheim (2019) Employees in Germany (in millions)
D
+23 % 2.54
+4 %
D
2.07 1.49
TOP
500
DAX
1.55
27
TOP
2007 Top 500 Family Businesses
500
DAX
27
2016 27 not family-owned DAX companies
What makes family businesses stand out in Germany? . Ownership, management and liability in one hand . Long-term corporate strategies and independence . Wide spatial distribution with training function . Often unknown to the general public
9
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Corporate character and economic significance
Are large listed companies and SMEs a contradiction in terms?
.
Value-added networks include all production steps needed to produce a final good – across different manufacturing sectors in different countries. Industrial services support these complex processes.
. .
The ability of companies in all sectors, regions and sizes to offer complete system solutions, versatile products and relevant services is a key success factor of German industry. In the German network of diverse corporate structures, large, medium-sized and small industrial companies compete together. The capabilities of the Mittelstand and large listed companies complement each other in the best possible way. This makes Germany as a business location attractive and local jobs resilient.
Increasingly complex supplier relationships in value-added networks Source: Roland Berger & BDI (2015)
Supports in case of demand peaks Provides data Determines production
Supplier A
Supplier B
Supplies parts
Provides data / services
Supplies manufacturing technologies
Supplier C
Influences demand
IT platform
End manufacturer
Delivers product
Delivers product
Offers service
Special service provider
10
Customer
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Corporate character and economic significance
Is the success of the German Mittelstand a foregone conclusion?
. .
SMEs account for around 54 percent of net value added in Germany (IW Köln 2019a). Strong competitiveness and innovative strength are based on a number of internal and external success factors. To maintain the high international reputation of the label “Made in Germany”, policy makers should understand and support this special model of success.
.
Clear, long-term strategies, reliable networks, resilient ownership structures and financial independence are particularly important for entrepreneurial activity in Mittelstand companies.
Success factors of the German SME sector Source: A.T. Kearney & BDI (2016)
Internationality Corporate stability
Network
Leadership and culture
Product and brand
Success Sales and market intelligence
Socioeconomic environment
Strategy
Production and costs
11
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Social significance
Social significance Do SMEs make an active contribution to the German education system?
.
Germany is internationally known for its Vocational Training System. More than 80 percent of all trainees in Germany get their vocational education in Mittelstand companies. Many of them benefit from attractive job guarantees.
. .
Not surprisingly, a high proportion of family businesses in a region usually goes hand in hand with a relatively high trainee ratio (IW Köln 2020a). In view of increasingly complex interactions of different technologies, more and more industries require diverse qualifications in all STEM subjects. With modern training programs, SMEs help to ensure that young people are well qualified and have little to fear from unemployment. Thus, SMEs have a positive impact on society as a whole.
Distribution of trainees by company size and trainee ratio by the share of family businesses in a region
2019
Trainee ratio (in %)
Source: IfM Bonn (2019a), IW Köln (2020a)
5
4
1.56 million trainees in total
4.9
4.6
4.2
3.7
Micro Small
3
1st quartile
2nd quartile
3rd quartile
4th quartile
Share of family businesses in the region
Medium Large Percentage of trainees among all employees subject to social security contributions.
12
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Social significance
Does the SME sector contribute to social cohesion?
. .
Economic and financial indicators alone cannot show how important SMEs and family businesses are. SMEs have strong regional roots. SMEs invest in people and machines primarily at home, at their traditional location – a contribution not only to local prosperity, but also to cohesion and tolerance in a vibrant society.
.
Entrepreneurs in family businesses understand just as well as the Basic Law (Article 14) that property entails obligations and that its use shall also serve the public good. In order to leave a well positioned company to future generations, many entrepreneurial families pursue long-term, sustainable strategies without short-term profit orientation.
Social contribution of the SME sector Source: Own illustration, based on IfM Bonn (2020b)
Company and entrepreneur
Regional anchoring
Mittelstand companies in times of economic crisis
Governance
Unity of ownership and management
Decision-making power in a few hands
Objectives
Independence and longterm orientation
Close link between personal and corporate goals
Informal institutions
Historical traditions
Social identification
Social resources
Networks
Emotional and social support
Economic stabilization
Maintaining employment and training
Maintenance of basic services
Social cohesion
Mittelstand conveys reliability and commitment
Contribution to the stabilization of democracy
13
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Social significance
Is local cultural sponsorhip an important aspect of SME culture?
.
At first glance, promoting culture is not one of a company’s core tasks. But SMEs understand that appropriate commitment can have a lasting and positive effect on the own corporate culture as well on the local community and business environment.
.
Supporting art and cultural events as well as local and regional sports clubs contributes to a vibrant local society and, overall, to more equivalent living conditions in Germany and social cohesion.
Motivation for cultural promotion in small companies with up to 200 and medium-sized companies with up to 2000 employees Source: BDI (2018a) N=135
Small
Medium
Reasons why the promotion of culture is important to the company 73%
Assumption of social responsibility 52%
Impact in the region 37%
Image and brand development
26%
Employee motivation / identification Personal interest
33%
Increasing the level of awareness
36%
Promotion of creativity in society
26% 29% 29% 22% 32%
Establishment of new contacts / networking Customer relationship management
Other
14
53% 57%
29% 30%
Marketing and communication goals in general
Capital investment, e.g. through collection purchases
61%
40% 37%
Cultural and educational goals
Sales promotion / advertising
58%
41%
Promotion of young artists
71%
10% 8% 2% 3% 3% 5%
55% 45%
89%
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Taxes
Taxes Is successful business succession in SMEs a social challenge?
. . .
The unity of management and ownership as well as thinking in terms of generations make the regulation of succession in family businesses a special challenge. Between 2020 and 2025, around 500,000 companies will face a generational change (BMWi 2020). The handover of a company is emotionally and culturally as well as economically and financially challenging. Inheritance tax law must be designed in a way that is SME-friendly in order to protect the defining characteristics of family businesses and the economic success associated with them.
Preferred succession solution Source: IfM Bonn (2018c)
18%
Handover to employees/ internal succession
53%
Within the family
29%
Sale to external parties/ external succession
15
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Taxes
Is the German tax environment SME-friendly?
.
Germany has become a high-tax country in terms of corporate taxation. As other countries (France, UK, USA) lower their tax rates, Germany loses ground. This is also shown by the Country Index for Family Businesses 2021: In the category “Taxes”, Germany ranks 20th out of 21 countries - an unacceptable trend.
.
The bureaucracy in the highly complex German tax system – key words are long retention periods and time-consuming tax audits – shows enormous potential for simplification. Especially small and medium-sized companies with limited resources would benefit from this.
.
In addition to corporate taxes, family businesses are burdened by inheritance tax and exit taxation.
Germany’s ranking in the category “Taxes” in the Country Index for Family Businesses (Competitiveness ranking) Source: ZEW Mannheim (2021)
Rank 1 Drivers of the downward trend Passive German tax policy with regard to: Tax burden of national business activity Tax burden of inheritance tax Tax burden of cross-border business activity Bureaucratic burden / complexity of the tax system
Competitiveness of the fiscal framework
.. .. Rank 11
Rank 12
Rank 13 Rank 16
Rank 20 Rank 21 2006
16
2008
2010
2012
2014
2016
2019
2020
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Funding
Funding Are Mittelstand companies financially independent and self-reliant?
. .
Mittelstand companies see themselves as independent and responsible for their own financing. Government financial assistance is a last resort for many industrial SMEs (BDI 2020a). In recent years, the average equity ratio of SMEs and family businesses has continuously increased, slowly converging to the level of large companies (Deutsche Bundesbank 2019). In SMEs with more than 50 employees, the average equity ratio was just below 35 percent in 2018.
.
The competitiveness and resilience of industrial SMEs declines if, for example, excessive taxation undermines their financial stability.
Equity ratio by company size in 2002 and 2018 in percent Source: KfW (2020a) 2018
2002 31.2 All German Mittelstand companies
18.4
34.8 50 and more employees 21.8
33.5 10 to 49 employees 15.0
22.4 up to 9 employees
14.9
0%
10 %
20 %
30 %
40 %
The KfW defines SMEs as private companies in all economic sectors with an annual turnover of up to €500 million.
17
Allegiance
Corporate culture
Customer relationship
18
Dedication and commitment
Flat hierarchies
Digital transformation
Future-oriented
Down to earth
Generations
Education and training
Home
Entrepreneurship
Independence
Europe
Innovation
Family
International
Financial self-reliance
Investments
Mittelstand IN WORDS Rural areas
Jobs
Security
Local community management
Solutions
Network
Stability
Pragmatism
Start-ups
Promotion
Supply chains and value-added networks
Quality
Sustainability
Reliability
Tradition
Responsibility
Visionaries and inventors
19
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Funding
Are financing requirements for SMEs becoming stricter and more complex?
. .
One of Germany’s strengths as a business location has been the stable and trustworthy credit market system with relatively low interest rates (Kiel Institute for the World Economy 2020). Sustainable Finance initiatives and the European taxonomy regulation make the financing situation for companies seeking a “green” transformation more difficult. By making the provision of Environment, Social and Governance (ESG) data mandatory for credit lines makes lending and thus, investing, more complicated.
.
In addition, the finalization of the “Basel III” guidelines makes loans more expensive for the larger SME sector. It must not restrict the scope for urgently needed investments.
Innovation and investment financing in SMEs Source: KfW (2019)
6%
3%
4% 12%
9%
49%
Innovation
Investment 34%
82%
Internal funds
20
Bank loans
Subsidies
Other sources
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Bureaucracy
Bureaucracy Do bureaucracy costs harm Germany as a business location?
.
Due to limited personnel and financial capacities, SMEs in particular are dependent on an efficient and unbureaucratic legal framework. By reducing bureaucracy, politics strengthens Germany as a business location and the competitiveness of local companies.
.
Regulatory sandboxes (Reallabore) can provide support at an early stage in examining the practicability of complex regulations. They help to realistically estimate the follow-up costs for SMEs. This includes costs for reporting and verification obligations as well as for control and administrative tasks.
.
€2.6 billion had to be spent on non-recurring compliance costs in 2019/2020. Thus, companies have been affected by regulations to a much greater extent than the administration and citizens.
One-time compliance costs of new regulation for companies, the administration and citizens by year Source: Nationaler Normenkontrollrat (2020) Figures rounded to million euros
147 Companies
Administration
Citizens
1275 240
1908
2583
519
2018 / 19
2019 / 20
21
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Bureaucracy
Do inefficient administrations affect business investment?
.
The growing gap between public and private digital equipment and capacity is hampering small and medium-sized businesses. At the same time, efficient e-government promises to save the state billions of euros in resources.
.
Lengthy planning and approval procedures as well as high bureaucratic costs hamper necessary investments in people, machines and business models. Functioning register matching and a digital company account will make cooperation between small and medium-sized companies and the authorities more efficient.
.
Administrative hurdles prevent innovative companies from entering the market. Germany is in danger of falling behind in the international competition for business locations (Digital Economy and Society Index 2020).
Digital Economy and Society Index 2020 Source: EU Commission (2020)
100
75
50
25
U ov K en Cy ia pr us It Po aly Cz G lan ec erm d h Re an pu y Bu bli lg c Hu aria ng Cr ary o Sl atia ov a G kia re Ro ec m e an ia Sl
Es to ni Sp a De ai nm n Fi ark nl an La d L tv Ne ithu ia th an er ia la n Au ds st r Ire ia l Sw and ed e M n al Fr ta an Lu Por ce xe tug m al bo u EU rg Be 28 lg iu m
0
The Digital Economy and Society Index is a composite index that summarises relevant indicators on Europe’s digital performance and tracks the evolution of EU Member States in digital competitiveness.
22
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Bureaucracy
Do disclosure requirements go hand in hand with more and more transparency of company data?
.
Disclosure requirements serve to collect relevant information in the commercial register. Thus, it becomes more transparent. For example, businesses can find information on another company’s contingent liabilities.
.
At the same time, maintaining trade secrets is essential – especially for Mittelstand companies with limited market power – in order to survive in the competitive environment. Hence, disclosure requirements should be designed as proportionate as possible to avoid completely “transparent” entrepreneurs.
.
In addition, the families of business owners are sometimes endangered because the use of disclosed information can hardly be controlled. Furthermore, the bureaucratic effort of disclosure requirements needs to be minimized.
Selected disclosure requirements of family businesses Source: Stiftung Familienunternehmen (2020)
Publicity under commercial law, GmbH Act and Stock Corporation Act
Planned public Country-by-Country reporting
Company
Publication of annual financial statements
Capital Market Transparency
AnaCredit
Transparency Register
Pay Transparency Act
23
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Mobility, transport, logistics
Mobility, transport, logistics Do Mittelstand companies in rural areas find efficient transport infrastructure?
.
Mittelstand companies and family businesses are often rooted in the countryside. Therefore, they depend on smart, easy and quick access to urban areas and their markets. This includes efficient transport opportunities for goods and people by road, rail, water and air.
.
Reality shows that damaged roads and bridges, a rail network in need of expansion and waterways in need of modernization severely restrict the economic operations of SMEs – especially because they are often integrated in national and cross-border value-added networks. Deficiencies in the road infrastructure disrupt business processes the most (IW Köln 2018).
.
More than half of the funds that the federal government invests in road construction go (with an upward trend) into maintenance measures (BMVI 2020). At the same time, expansion and new construction would be urgently needed in many places.
Impact of different infrastructure deficiences on business processes Source: IW Köln (2018)
30 %
20 %
10 %
0%
ns tio rk a o ic un netw m
ffic
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tra
Ro
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Survey of 2600 companies in 2018.
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BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Labor market
Labor market Is the SME sector suffering from an increasing shortage of qualified workers?
. .
The brains, hearts and hands of the workforce are some of the most important production factors in Germany, a country with a deficit in natural resources. Demographic developments enforce the bottleneck of skilled labor – especially among SMEs in rural regions. What is needed is targeted recruitment from abroad and more intensive training, including in digital skills.
.
In an EU comparison (and also in comparison with large German companies), SMEs lack specialists in information and communications technology (ICT). Thus, there is a lack of expertise in an area that is highly relevant for a modern economy.
Companies with ICT specialists in an EU comparison Source: IfM Bonn (2019b)
SME (Germany)
17 %
SME (EU average)
19 %
Large companies (Germany)
77 %
Large companies (EU average)
75 %
0%
25 %
50 %
75 %
100 %
Here, "SME" refers to companies with up to 499 employees. In Germany, an average of 17% of SME companies report that they employ ICT specialists.
25
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Digitalisation and innovation
Digitalisation and innovation Are SMEs driving research, development and innovation?
. .
In a comparison of economic sectors, internal spending on research and development (R&D) is concentrated primarily in manufacturing. SMEs play a key role in keeping the German innovation system fit for the future. The indus trial SME sector is characterized by lively patenting activities, good connections to the scientific community and an overall high level of research intensity.
.
In an international comparison, Germany is still among the international innovation leaders, ranking fourth in the Innovation Indicator 2020 (BDI 2020b). However, Germany risks to fall behind its main competitors if the environment for innovation does not improve consistently – particularly in the areas of technology-neutral investment, funding in R&D, digital infrastructure and attracting skilled labor.
Internal R&D expenditure in Germany by company size Source: IfM Bonn (2017)
SME: up to 499 employees
Large companies: 500 and more employees
SME share in percent
in million euros
59902 52869
54565
49027 42792 38924 36184
15.9
26
15.5
37946
16.2
45440
45728
39375
16.1
16.2
15.5
14.6
14.0
13.3
13.1
12.9
6851
7149
7328
7554
8285
8350
7839
7970
8082
8261
8885
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Digitalisation and innovation
Can SMEs take the digitalisation for granted?
. .
Digitalisation offers companies many opportunities in terms of products and services, pro cesses and structures, resource efficiency, and new business models. At the same time, small and medium-sized enterprises face fundamental challenges: Digitalisation is a matter of high investment costs, constant data and legal security, access to knowhow through internal and external networking, and successful cultural change.
.
High-speed nationwide broadband networks are the lifeblood of digital applications. However, Germany’s digital infrastructure lacks behind in international comparisons and remains a key obstacle for businesses, especially for SMEs in the countryside. Strategic investments are long overdue.
Challenges in enabling digitalisation Source: IfM Bonn (2020a)
N=135; in percent Extending digital infrastructure
79.1
Increasing IT security
74.1
Ensuring data protection
43.7
Ensuring access to AI skills
38.9
Further developing/ enforcing legal framework
38.0
Expanding digital networking between companies
31.5 0%
25 %
50 %
75 %
100 % 27
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Digitalisation and innovation
Are traditional Mittelstand companies and young start-ups a contradiction in terms?
.
Nearly every second major family-owned business already cooperates with start-ups (BDI 2018b). In strategic terms, cooperations are often about developing and implementing new technologies, shaping the digital transformation, and further developing products and services. There are also advantages for start-ups: beyond new access to customers and networks, the financial support of established companies is attractive. It turns out that grownups rely on start-ups – and vice versa.
.
Legal uncertainties are potential obstacles for the cooperating partners. While there may be a desire for a flexible cooperation without a detailed formal contract on the one side, this can pose a challenge to a risk-averse company or entrepreneuer on the other side.
.
The market for equity capital, especially venture capital from private investors, is characterized by low volumes in Germany compared to other countries.
Motives for cooperation with start-ups and spatial distribution of startups and industrial SMEs Source: IW Köln (2019b) Leading start-up regions Cluster of the industrial Mittelstand
N=126; in percent Development of new technologies
54.0
Shaping the digital transformation
50.8
Product and service development
50.0
Access to new markets
29.4
Access to talented professionals
26.2
Improvement of the production processes
19.1
Cultural transfer and inspiration Sales optimization No strategic goals Other
28
16.7 13.5 9.5 3.2
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Energy, climate, environment
Energy, climate, environment Are German energy policies SME-friendly?
.
Mittelstand and family-owned companies in Germany have to prove themselves in a high-electricity-price country. The government’s share of the price of industrial electricity – taxes, levies and surcharges – is around 52 percent.
.
The EEG surcharge is capped and slightly reduced for the first time in 2021. At the same time, the government should strengthen the steering effect of the CO2 price in taxes and establish internationally comparable CO2 prices.
.
More and more SMEs fear the purely national measures for energy transition and climate protection. In the long term, they see profitable local investments and competitive jobs at risk.
Composition of electricity prices in 2020 in detail and electricity costs by country Source: BDEW (2020) and IW Köln (2020b) without taxes 17.75
Total cost
0.416
Offshore liability levy
0.007
Surcharge for interruptible loads Concession fee
0.110 0.230 0.226
Section 19 StromNEV levy CHP surcharge
1.537
Electricity tax
6.756
Renewables surcharge Procurement, grid fee, sales
8.470
Italy Germany Ireland UK Greece Portugal Latvia EU27 Slovakia Lithuania Spain Belgium Austria Luxembourg Denmark France Estonia Croatia Hungary Netherlands Slovenia Poland Czech Republic Norway Romania Turkey Bulgaria Finland Serbia Sweden
0 Costs in ct/kWh
including taxes*
Electricity prices for companies in the 1st half of 2019, in ct/kWh
2
4
6
8
10
12
14
16
18
* without VAT 29
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Energy, climate, environment
Are the government’s environmental targets geared to the everyday business of SMEs?
.
For decades, Mittelstand companies have been making a decisive contribution to the increasingly efficient use of natural resources with innovative technologies and products. 88 percent of SMEs say that sustainability and climate protection are an essential part of their corporate strategy (Creditshelf 2020).
.
However, entrepreneurship in Germany is becoming increasingly difficult due to gold-plating of EU requirements. More and more bureaucracy is being created, including by environmental regulations.
.
In this context, a diverse industrial sector in terms of branches, regions and company sizes is a key to competitiveness and sustainable development. A healthy mix of SMEs and large listed companies across the country creates the prerequisite for investing comprehensively in climate and environmental protection, both in cities and the countryside.
Challenges of SMEs in fostering sustainability and climate protection Source: IfM Bonn (2020a)
N=135; in percent
30
Minimizing bureaucratic burden of sustainability/climate protection efforts
Making climate/environmental policies SME-friendly
Making the Green Deal SME-friendly
Ensuring secure energy supply
&
Developing sustainable economic system
S
Internalizing external costs for climate protection
52.8
52.7
50.9
46.7
42.9
27.1
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Foreign Trade
Foreign Trade What do SMEs think of open borders?
. .
Germany’s export-oriented SME sector has participated in and benefitted from globaliza tion to a greater extent than comparable sectors in other countries. Without open borders in Europe, the German SME sector would not be as strong as it is today. The freedom and planning reliability in the EU single market, the proximity between company headquarters and sales markets, and relatively low language and cultural barriers are driving this development. Bureaucratic obstacles, for example in the cross-border movement of people and services – keyword A1 certificate procedures – limit the potential of the EU single market.
.
From a global perspective, foreign trade disputes, increasing protectionism and currency risks negatively affect the export business.
Share of foreign sales in total sales by region Source: KfW (2020b)
in percent Share of foreign sales... ...of companies generally active abroad 28.6 26.7
27.4
...of companies active in Europe
...of companies active outside Europe
28.2
18.3
18.9
18.7
19.6
15.7 13.2
2015
2016
2017
2018
2015
2016
2017
2018
2015
13.9
14.0
2016
2017
2018
31
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
References
References A.T. Kearney & BDI (2016). BDI/A.T. Kearney-Mittelstandspanel 2016 Wie geht es dem German Mittelstand? https://bdi.eu/publikation/news/ bdi-a-t-kearney-mittelstandspanel-2016/.
IfM Bonn (2017). Mittelstand im Einzelnen, Forschung und Entwicklung (FuE). https://www.ifmbonn.org/statistiken/mittelstand-im-einzelnen/ forschung-und-entwicklung-fue.
BDEW (2020). BDEW-Strompreisanalyse Juli 2020. https://www.bdew.de/service/daten-und-grafiken/ bdew-strompreisanalyse/.
IfM Bonn (2018a). Mittelstand im Einzelnen, KMU im EU-Vergleich. https://www.ifm-bonn.org/statistiken/ mittelstand-im-einzelnen/kmu-im-eu-vergleich.
BDI (2018a). Unternehmerische Kulturförderung in Deutschland. Siebenhaar, K. & Müller, A.; Hrsg. Kulturkreis der deutschen Wirtschaft im BDI.
IfM Bonn (2018b). Volkswirtschaftliche Bedeutung der KMU. https://www.ifm-bonn.org/statistiken/mittelstandim-ueberblick/volkswirtschaftliche-bedeutung-der-kmu/ deutschland.
BDI (2018b). Große Familienunternehmen suchen die Nähe zu Start-ups. https://bdi.eu/artikel/news/grossefamilienunternehmen-suchen-die-naehe-zu-start-ups/. BDI (2020a). Umfrage „Corona-Brennpunkte im industriellen Mittelstand. Pulsmessung und Perspektiven aus der Praxis“. https://bdi.eu/media/themenfelder/mittelstand_familienunternehmen/downloads/20200911_ Umfrage_BDI_Corona-Brennpunkte_im_industriellen_ Mittelstand.pdf. BDI (2020b). Innovationsindikator 2020. https://bdi. eu/publikation/news/innovationsindikator-2020/. BMVI (2020). Erhaltungsbedarfsprognose für die Bundesfernstraßen. https://www.bmvi.de/SharedDocs/ DE/Artikel/StB/erhaltungsbedarfsprognose.html. BMWi (2020). Unternehmensnachfolge schafft Zukunftsperspektiven – Modellprojekte am Start https://www.bmwi.de/Redaktion/DE/Pressemitteilungen/2020/10/20201001-unternehmensnachfolgeschafft-zukunftsperspektiven.html. Creditshelf (2020). Finanzierungsmotor 2020. https:// www.creditshelf.com/finanzierungsmonitor. Deutsche Bundesbank (2019). Hochgerechnete Angaben aus Jahresabschlüssen deutscher Unternehmen von 1997 bis 2018, Statistische Sonderveröffentlichung Nr. 5. EU Kommission (2020). Digital Economy and Society Index. https://digital-agenda-data.eu/datasets/desi/ visualizations. IfM Bonn (2015). Mittelstand zwischen Fakten und Gefühl, IfM Materialien Nr. 234.
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IfM Bonn (2018c). Unternehmensnachfolgen in Deutschland 2018 bis 2022. Daten und Fakten Nr.18. IfM Bonn (2019a). Mittelstand im Einzelnen, Auszubildende. https://www.ifm-bonn.org/statistiken/ mittelstand-im-einzelnen/auszubildende. IfM Bonn (2019b). Mittelstand im Einzelnen, Digi talisierung der KMU im EU-Vergleich. https://www. ifm-bonn.org/statistiken/mittelstand-im-einzelnen/ digitalisierung-der-kmu-im-eu-vergleich. IfM Bonn (2020a). Das Zukunftspanel Mittelstand 2020. Update der Expertenbefragung zu aktuellen und zukünftigen Herausforderungen des deutschen Mittelstands. IfM Materialien Nr. 282. IfM Bonn (2020b). Der gesellschaftliche Beitrag des Mittelstands: Konzeptionelle Überlegungen. IfM Materialien Nr. 283. ifo Institut München (2020). Der Beitrag der Familienunternehmen zum Steueraufkommen in Deutschland – Entwicklung der Steuern von Einkommen und Ertrag, 2. Auflage, erstellt i. A. der Stiftung Familienunternehmen. Institut für Weltwirtschaft Kiel (2020). Analyse der industrierelevanten wirtschaftlichen Rahmenbedingungen in Deutschland im internationalen Vergleich, Endbericht. Projekt Nr. 24/19. IW Köln (2018). Infrastrukturmängel in Deutschland, IW-Trends 2/2018.
BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
References
IW Köln (2019a). Zehn Thesen zur Stärkung von Mittelstand und Handwerk. Kurzstudie. https://www. iwkoeln.de/studien/gutachten/beitrag/roman-bertenrath-klaus-heiner-roehl-philipp-schade-zehn-thesenzur-staerkung-von-mittelstand-und-handwerk.html.
ZEW Mannheim (2019). Die volkswirtschaftliche Bedeutung der Familienunternehmen, 5. Auflage, erstellt von: Leibniz-Zentrum für Europäische Wirtschaftsforschung (ZEW) & Institut für Mittelstandsforschung (ifm) i. A. der Stiftung Familienunternehmen. https://www.familienunternehmen.de/de/wissenschaftliche-arbeit-undfoerderung/studien/die-volkswirtschaftliche-bedeutung-der-familienunternehmen-auflage-5.
IW Köln (2019b). Start-ups und Mittelstand. Potenziale und Herausforderungen von Kooperationen. IW-Analysen 134. IW Köln (2020a). Die Bedeutung der Familienunternehmen für ländliche Räume – Beitrag zum Wohlstand und Zusammenhalt. Erstellt i. A. der Stiftung Familienunternehmen. https://www.iwkoeln.de/studien/gutachten/beitrag/hanno-kempermann-manuelakrause-klaus-heiner-roehl-familienunternehmen-imlaendlichen-raum.html.
ZEW Mannheim (2021). Länderindex Familienunternehmen, 8. Auflage, erstellt von: Leibniz-Zentrum für Europäische Wirtschaftsforschung (ZEW) & Calculus Consult i. A. der Stiftung Familienunternehmen.
IW Köln (2020b). Industriepolitische Herausforderungen – Horizontale Ansätze und neue Aufgaben für den Staat. https://www.iwkoeln.de/fileadmin/user_upload/ Studien/IW-Analysen/PDF/2020/Analyse139-Industriepolitische-Herausforderungen.pdf. KfW(2019). Die Finanzierung von Innovationen und Investitionen in mittelständischen Unternehmen im Vergleich. Fokus Volkswirtschaft. Nr. 237. KfW Research (2020a). Corona-Krise hat den Mittelstand fest im Griff, aber Widerstandsfähigkeit (noch) hoch. Fokus Volkswirtschaft Nr. 286. KfW (2020b). KfW-Internationalisierungsbericht 2020. https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Internationalisierungsbericht/KfW-Internationalisierungsbericht-2020.pdf. Nationaler Normenkontrollrat (2020). Jahresbericht. Krise als Weckruf: Verwaltung modernisieren, Digitalisierungsschub nutzen, Gesetze praxistauglich machen. Roland Berger & BDI (2015). Die digitale Transformation der Industrie. https://bdi.eu/media/presse/publikationen/information-und-telekommunikation/Digitale_Transformation.pdf. Stiftung Familienunternehmen (2020). Offenlegungspflichten. https://www.familienunternehmen.de/fokus/ corporate-governance/offenlegungspflichten.
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BDI Fact Check | Mittelstand & Family Businesses The German Mittelstand
Imprint
Imprint Publisher BDI – Federation of German Industries Breite Straße 29 10178 Berlin T.: +49 30 2028-0 www.bdi.eu Editorial team Vanessa Wannicke, Senior Manager Department German Mittelstand and Family Businesses Fabian Wehnert, Head of Department Department German Mittelstand and Family Businesses We would like to thank all members of the BDI/BDA SME Committee for their commitment. Conception & Realization Sarah Schwake, Senior Manager Department for Marketing, Online and Event Management Layout Michel Arencibia, Art-Director www.man-design.net Printing Das Druckteam www.druckteam-berlin.de Publishing Company Industrie-Förderung Gesellschaft mbH, Berlin Image credit Cover: 182073021 | © Gorodenkoff | stock.adobe.com P. 3: FXgbqr-t7uw | unsplash.com Date and Number April 2021 BDI Publication No. 0108
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