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Press Release from 2016-11-20 / Group, KfW Research

KfW Competitiveness Indicator 2016: German SMEs are global competitiveness champions

  • German enterprises ahead of French and British SMEs
  • Positive assessment of location factors and business performance
  • Energy efficiency as a competitive factor – US SMEs are catching up

Small and medium-sized enterprises in Germany currently perceive themselves as very well equipped to compete with their foreign rivals. The KfW Competitiveness Indicator 2016 gives them a spot at the top of the leaderboard this year, after second place in 2014. Close behind are SMEs in France and the UK. Small and medium-sized enterprises in the US perceive their competitiveness as considerably impaired by unfavourable location conditions such as infrastructure deficiencies and high bureaucratic hurdles, dropping to fourth place in 2016.

The KfW Competitiveness Indicator is based on a survey of more than 2,200 SMEs in ten important industrialised and emerging market economies. It examines the strengths and weaknesses of these enterprises and their location in comparison with their most important international competitors. The leading position of German SMEs is based on their continuing very good location conditions. In other economies, small and medium-sized enterprises see themselves significantly more constrained by inadequate infrastructure, political instability, corruption and funding difficulties. SMEs in Germany see potential for improvement nevertheless. They want bureaucracy to be cut further and still perceive taxes and levies as too high. The skills shortage due to demographic change is another cause of concern for many SMEs.

Small and medium-sized enterprises in Germany rate their own business performance better than two years ago. They continue to score on quality, innovation and service, but have recently caught up significantly on price competitiveness as well. An important driver is probably the depreciation of the euro as a result of the ECB’s expansionary monetary policy, which also benefited SMEs in other euro area countries such as France, Spain and Italy.

“There is no question that German SMEs are in good shape. Their high international competitiveness greatly contributes to growth and employment”, commented Dr Jörg Zeuner, Chief Economist of KfW Group, on the findings of the current KfW Competitiveness Indicator. “But our survey also illustrates that enterprises should not rest on their laurels. Competitors from other countries are on the starting blocks to gain market share.” Zeuner gives developments in the European neighbouring countries a positive rating: “Spain and France have improved their competitiveness and are in much better shape than two years ago. Italy is making slightly slower progress, but it is on the right path.”

For the first time, KfW Research surveyed SMEs also on their energy efficiency measures for the Competitiveness Indicator 2016. According to KfW’s Chief Economist Zeuner, these measures can contribute substantially to strengthening an enterprise’s competitiveness: “Energy efficiency measures reduce energy costs and make businesses less vulnerable to energy price fluctuations”, said Zeuner. “They can also contribute to leaner processes, higher product quality and better working conditions – and they have a positive impact on corporate image.”

The survey shows that the topic does not have the same priority for all SMEs around the world. Energy efficiency is important to small and medium-size enterprises if they perceive energy costs as a high burden or climate regulations as particularly strict. Germany is the only country where it is striking that a large portion of SMEs (88%) regard the topic of energy efficiency as important but at the same time no longer perceive energy costs as such a heavy burden. This shows that the high energy prices of the past and public support measures have not only contributed to instilling a permanent awareness of energy efficiency within enterprises. They have also led enterprises to improve their energy efficiency significantly and, in this way, reduce the burden of energy costs. One in four German SMEs have implemented specific energy efficiency measures in the past two years, and one in six enterprises are planning such measures. SMEs in other industrialised countries such as the UK, Italy and Spain are roughly on a par. France and Japan are close behind. When it comes to implementing energy efficiency measures, SMEs in the United States are currently at the top, with 29% of them taking action between 2014 and 2016. Apparently, President Obama’s climate policy is having an impact. However, enterprises in the USA also start from a much lower level than European enterprises, so they have a lot of catching up to do. “In international comparison, German SMEs have already achieved a good level of energy efficiency as a competitive factor. But it is absolutely essential that they stay on the ball”, said KfW’s Chief Economist Zeuner.

KfW Competitiveness Indicator