One-Third of German Companies Plan Job Cuts in 2026 Amid Investment Decline and Economic Uncertainty
One-third of German firms plan workforce reductions in 2026, with industrial sectors and investment expectations notably impacted, amid regional disparities and calls for government reforms.
- • One-third of German companies plan to cut jobs in 2026, with industrial firms most affected (41% planning layoffs).
- • Only 18% of companies intend to create new jobs, indicating a bleak hiring climate.
- • Investment expectations are historically low; 33% plan to reduce investments while only 23% plan increases.
- • Regional disparities show optimism in northern Germany and Bavaria, but pessimism in the northeast.
- • IW expert Michael Grömling warns that geopolitical stress and domestic costs threaten economic recovery without government reforms.
Key details
A recent survey by the Institute of the German Economy (IW) has revealed troubling economic developments for Germany in 2026. Approximately one-third of companies across the country plan to reduce their workforce, with only 18% planning to recruit new employees. The industrial sector faces the sharpest impact, where 41% of companies expect to cut staff, while merely around 14% anticipate adding new jobs.
Investment intentions are also deteriorating significantly. Only 23% of firms intend to increase investments next year, compared to 33% that plan to scale back, marking the longest and most severe period of negative investment expectations observed since the survey's inception.
Regional economic outlooks vary sharply. Optimism exists mainly in northern Germany and Bavaria, where numerous companies predict increased production. In contrast, nearly half of the companies in the northeastern region foresee production declines, signaling a bleak economic sentiment there.
IW economic expert Michael Grömling underscored that this trend represents "job cuts instead of an economic turnaround," with businesses hampered by substantial geopolitical pressures and domestic challenges, including high energy costs, elevated social insurance expenses, and bureaucratic burdens. He emphasized that without significant government reforms, the effectiveness of the federal government's multi-billion-euro special aid programs remains doubtful.
This survey indicates a growing crisis in both employment and investment landscapes, posing serious challenges for Germany's economic recovery prospects in 2026.