The 2012/11/26 at 07:04
Marie Luginsland, in Germany
While German exports in the Eurozone dropped by 9 % in September this year compared with 2011 figures, German SMEs are staying on track as far as growth of their overseas activities is concerned. According to a recent survey by the KfW-Bankengruppe (German development bank), 64 % of these companies foresee increasing their exports by 2015, while 34 % count on maintaining current levels, and only 2 % think they will cut down their scope.
These high-performance SMEs geared towards innovation and export, known as the “Mittelstand” in German, intend to continue their extension on international markets. They follow the global movement of the economy at a time when German exports have gone up by 80% in the space of a decade to 1,200 billion euros. As noted by the KfW, one-quarter of German SMEs achieve 20 to 30 % of their turnover from foreign clients today. This proportion is higher in certain sectors such as the goods transformation industries. For 86 % of companies in this branch, one-third of sales are carried out outside Germany.
German SMEs draw their confidence from the release of positive new indicators for the highest-exporting branches of German industry. “In September, order books showed growth of 11 % compared with 2011 and German machine exports received a 7.7 % boost,” points out Olaf Wortmann, Economist at VDMA, the German machinery industry federation. He specifies that while the United States is the main beneficiary with a 2 % increase, “Great Britain, Benelux, Austria and France record single- if not double-figured growth”. Amongst the good clients of Germany machinery, Russia ranks fourth after China, the United States and France. As announced by Wilfried Schäfer, Secretary General of VDW, the German federation for machine tools, “deliveries to Russia climbed to over four billion euros in the first quarter, in other words 14 % more than last year”.
In the Eurozone crisis context, the optimism of German SMEs is all the more surprising as 92 % of them declare having at least one European country as a target for their products, compared to 28 % for North America and 26 % for China. In spite of everything, the European continent remains the leading client of German businesses, accounting for a turnover of 278 billion euros – in other words 47 % of their international turnover (11 % of the German GDP).
What should be noted is that while 53 % of SMEs export to Eastern and Central Europe, Western Europe remains the privileged partner. 57 % declare that they export to France, 64 % to Benelux and 77 % to their neighbours on the other side of the Alps. This figure is all the higher when the businesses are small in size (between 5 and 10 million euros in turnover). Another paradox revealed by the KFW survey is that the smaller the company is, the less it claims to fear the Eurozone crisis. And for good reason: most of them have relationships with countries that are their immediate neighbours, still relatively untouched by the recession: Austria, Switzerland, the Czech Republic and Poland.
It is also on these favoured markets – including France and Benelux – that German SMEs often try out setting up base overseas – a trend towards internationalisation that like export, has intensified in recent years. 20 % of the 3,600 SMEs surveyed by the KfW invested overseas between 2007 and 2011 for a total sum representing one-sixth of their global investments. As explains Michael Holz, Expert at the IfM*, “in these ‘target’ countries, SMEs rely on the network of IHKs (German CCIs, editorial note) that offer them better access to the markets thanks to sound preparation in Germany and the availability of tools, namely in ‘company pools’.”
*IfM Institut für Mittelstandsforschung, Bonn (a research institute on SMEs).
** a temporary grouping of businesses acting like an incubator for international activities.