KfW Research: Export turnover of German SME sector dropped by 17% to EUR 494 billion

• Lowest level in more than ten years
• Coronavirus pandemic has hit exporters harder than businesses with purely domestic operations
• Small businesses want to reduce international activities, but no broad retreat by SMEs is underway

Depressed foreign demand, disruptions to international supply chains, transport difficulties and border controls have led to a dramatic slump in German exports during the coronavirus crisis. The current KfW Internationalisation Report shows that the crisis has disproportionately affected the 781,000 small and medium-sized enterprises that generate part of their turnover internationally. SMEs with international business activities estimate their turnover outside Germany to have fallen by 17% to EUR 494 billion in 2020 (2019: EUR 596 billion) – the lowest level in more than ten years. Germany’s total goods and services exports dropped by 10.1% to around EUR 1,477 billion last year.

SMEs that do business internationally have generally been impacted more severely by the pandemic than small and medium-sized enterprises with exclusively domestic operations. Particularly during the first lockdown in the spring of 2020, which involved temporary closures of intra-European borders, they were much more likely to record turnover losses than purely domestically oriented businesses (77% vs. 60%), according to surveys conducted by KfW Research. They were also more likely to be affected by a reduced sales region (31% vs. 12%) and supply chain disruptions (20% vs. 15%, data as at April 2020). As the pandemic was progressively contained in important supplier markets such as China and the economy began to recover in key sales markets in the summer of 2020, the situation for small and medium-sized enterprises with international activities improved somewhat. But data for September show that they still remained more severely affected than SMEs that focused on the domestic market.

The survey findings of KfW Research point to a mixed trend for the future. Roughly four in ten of the small and medium-sized enterprises currently active internationally intend to focus more strongly on the domestic market in the next five years – especially those that have so far supplied only few foreign markets. At the same time, around one fourth of those with international activities intend to diversify their exports more broadly and tap into further foreign markets as well. These are mostly larger and more experienced exporters that have the necessary financial and human resources – in contrast with smaller SMEs. The enterprises surveyed believe that countries in Europe will tend to become more important – with the exception of the United Kingdom. Brexit and the resulting new customs regulations and logistical challenges make exporting unattractive for smaller exporters in particular. With respect to procurement, three in ten SMEs intend to focus more strongly on the domestic market. However, only very few (6%) intend to withdraw partly or completely from global value chains.

“German SMEs with international business activities have had a tough year. The coronavirus pandemic and the restrictions have hit them both at home and in their exports and supply chains. The experience of this crisis will bring about lasting changes.” Referring to the new KfW Internationalisation Report, Dr Fritzi Köhler-Geib, Chief Economist of KfW, commented: “Many SMEs, especially smaller ones, want to focus their business activity more strongly on the domestic market in the future. Overall, however, SMEs will continue to be active internationally. Export-oriented enterprises and those that are integrated into global value chains in particular continue to see the opportunities that lie in a geographically diversified sales and procurement strategy. The benefits of the international division of labour continue to apply despite the coronavirus crisis. Integration into global value chains enables efficiency gains that contribute to securing the international competitiveness of German enterprises – and thus to growth and prosperity.”

You can find the current KfW Internationalisation Report at:
KfW-Internationalisierungsbericht 2021(PDF, 1 MB, non-accessible)

The dataset:
The KfW Internationalisation Report is based on the SME Panel (KfW-Mittelstandspanel), which has been conducted since 2003 as a recurring postal survey of small and medium-sized enterprises in Germany with annual turnover of up to EUR 500 million. The findings of the KfW SME Panel are representative of all SMEs of all sizes and across all industries in Germany. A total of 9,889 SMEs took part in the current survey wave, which was conducted from 10 February to 19 June 2020. The analyses conducted to determine the effect of the coronavirus crisis on SMEs are based on four supplementary surveys conducted as part of the KfW SME Panel (2 to 14 April 2020, 2 to 12 June 2020, 1 to 14 September 2020 and 12 to 22 January 2021), in which the responses of up to 3,400 businesses were taken into consideration. As the supplementary survey was linked to the main database of the KfW SME Panel, its results provide a representative picture of the current coronavirus impact.