KfW Research: KfW SME Atlas shows regional diversity of Germany’s SMEs

• For the second time, KfW Research provides deep insights into the structure of the SME sector at federal state level
• Broad diversity in investment, returns and funding patterns from one state to another
• Challenges affecting the whole of society concern the overall SME sector

Despite the most recent crises, Germany’s SMEs are showing themselves to be resilient and multifaceted. The current KfW SME Atlas is a regionally differentiated analysis of key indicators of the business activity of small and medium-sized enterprises (SMEs) and sole traders. Its second edition provides detailed insights into the regional diversity of small and medium-sized entrepreneurship. The 2024 KfW SME Atlas demonstrates that for all their regional peculiarities, the federal states have many features in common.

Despite all crises, Germany’s SMEs are hiring more workers and are a supporting pillar of the German labour market in all regions of the country. With more than 32 million employees and average annual employment growth of around 1.6% (in the years 2018 to 2022), SMEs now employ more workers than ever before. How strong the SME sector is in times of crisis is also illustrated by its positive turnover growth of 4.4% on average across all federal states. In the 2018-2022 period, Schleswig Holstein topped the list at 6.2%, followed by Berlin with 5.5%.

The analysis shows that the clear dividing line between eastern and western German federal states has all but disappeared. In terms of profit margin, for example, the leading states are Berlin (9.4%) and Bavaria (8.3%), along with Brandenburg (8.1%) and Saxony (7.7%). Businesses there post well above-average profitability. Brandenburg has also taken the lead in investment appetite, hovering above the national rate of 43% of investing SMEs. Climate investment has come more strongly into focus in all federal states. The share of climate investment in all new investment by SMEs was around 15% (EUR 240 billion) in 2022.The businesses most active in this field were domiciled in Hessen (18.7%), Saxony-Anhalt (18.4%) and Brandenburg (17.6%).

“Even if the status quo differs from one federal state to another, the fundamental challenges of the future are very similar. The green and digital transformation requires the entire SME sector to redouble efforts. Demographic change means that mobilising workers will be decisive in the future”,

said Dr Fritzi Köhler-Geib, Chief Economist of KfW.

“In this context, however, the identified regional particularities also illustrate the importance of putting in place differentiated economic policy measures that provide tailor-made support for the specific business landscape.”

The KfW SME Atlas is available for download at: KfW SME Atlas Germany | KfW

The database:

The KfW SME Atlas is based on a regional evaluation of the KfW SME Panel with which KfW Group has been reporting annually about the current situation in the SME sector since 2003. The KfW SME Panel is the first and so far the only representative longitudinal data section for all small and medium-sized enterprises in Germany. The KfW SME Atlas was created using the five most recent annual survey waves of the KfW SME Panel. The findings are representative at state level.