• Almost one third of businesses expect their international turnover to decline in coming years
• Diversification of export markets is in full swing
• A sharply higher share of businesses plans to offshore activities

Geopolitical crises and conflicts, trade policy uncertainties and growing competitive pressure from China have created ongoing problems for German trade. As a result, 30 per cent of German SMEs with international business predict that their cross-border turnover will fall in the coming three years. Of these, six per cent even expect a sharp drop. Just under one fourth of all internationally active SMEs expect their foreign turnover to grow, while 47 per cent expect no change.

These are some of the findings of a new study by KfW Research on the international business activities of German SMEs. The business survey was conducted in January 2026, before the war with Iran. Since then, views are likely to have deteriorated once again.

Some SME segments have already been responding to the changed environment and realigning their international business. Thus, nearly 16 per cent of internationally active businesses have tapped into new export markets or acquired new customers abroad in the past five years, while seven per cent plan to do so. Around twice as many plan to target their business more to the EU’s internal market.

Manufacturing, which generates around 43 per cent of SMEs’ total international turnover, is under the greatest pressure to change and adapting correspondingly by diversifying its export markets.

What is of concern is that a growing number of SMEs are planning to offshore at least some of their activities. In the past five years, only four per cent of all internationally active businesses have done so. However, 12 per cent responded that they plan to do so in the next five years, and indeed 29 per cent of manufacturing enterprises.

Not all businesses will put their plans into action, to be sure. Still, assuming only half of them realise an existing plan, it would nonetheless mean that around seven per cent of industrial SMEs could shift part of their production abroad within the next five years.

The number of industrial SMEs that are considering offshoring their activities is growing. That is a concerning development for growth and prosperity in Germany, said Dr Dirk Schumacher, Chief Economist of KfW. Policymakers should make use of all their powers to prevent de-industrialisation. The most important lever is to strengthen Germany’s competitiveness as a business location. Cutting red tape, lowering energy and labour costs, and reducing taxes and levies are the main catchwords here. Moreover, trade and industrial policy instruments need to be deployed in a targeted manner in order to protect firms from disadvantages in international trade.

Currently (as at 2024), around 21 per cent of the almost 3.9 million SMEs are internationally active. In the manufacturing sector, it is a disproportionately high share of around 46% of enterprises.

In 2024, the last year for which data is available, the international turnover of German SMEs was EUR 699 billion, according to the study. This was a sideways movement since 2023. Adjusted for inflation, however, that turnover fell by 2.9 per cent. According to the January 2026 survey, one third of internationally active enterprises experienced a further decline in turnover in 2025 on the previous year. Only a good one fifth of enterprises recorded higher international turnover.

The current study can be downloaded from KfW Internationalisation Report | KfW

The KfW Internationalisation Report is based on the data from the most recent survey wave of the KfW SME Panel (10 February to 20 June 2025) and a supplementary survey on international business activities (12 to 21 January 2026). Each year since 2002, KfW Research surveys small and medium-sized enterprises from all economic sectors and size classes for the KfW SME Panel. Details: www.kfw.de/mittelstandspanel

KfW supports SMEs with a number of promotional programmes on behalf of the Federal Government. More information is available at We are strengthening the SME sector (German page).