German SMEs Face Rising Insolvencies and Declining Economic Contributions in 2026

Small and medium-sized enterprises (SMEs) in Germany are experiencing increasing economic pressures in 2026, with rising insolvencies and a notable decline in their share of revenue, employment, and value creation across the country. Recent analyses highlight a worrying shift in the economic landscape for German SMEs, influencing regions and the overall market significance of this sector.

According to an analysis by IT service provider Datev, SMEs—defined as companies with up to 500 employees and annual revenues up to 50 million euros—make up more than 99% of the over three million companies in Germany. Despite stable numbers in their population, SMEs are under growing strain. Data shows their contribution to total revenue fell by four percentage points between 2018 and 2023, now accounting for only 26.2% of the total revenue. Similarly, the employment share among SMEs dropped to 53.3%, down by four points as well. Their share of Germany’s gross value added declined by two points to 40.9%.

Additionally, there is a regional shift in the insolvency trend. While eastern Germany had previously faced more pronounced economic challenges, recent data indicate that the bulk of new business closures and relocations are occurring increasingly in western Germany, evidencing a changing geographical pattern of SME hardships.

This trend signals growing financial distress within the Mittelstand, putting pressure on small and medium-sized companies that traditionally form the backbone of the German economy. The surge in insolvencies and the decreasing economic footprint of SMEs pose challenges for employment and economic stability across the country.

As the pressures mount, stakeholders and policymakers may need to consider targeted support and interventions to counteract the accelerating decline and insolvency wave among Germany's vital SME sector.