Since 1849: German family enterprise announces a reduction
Struggling Economy Puts German Businesses Under Pressure
Germany's economy is facing a challenging period, with numerous factors contributing to subdued growth, reduced investments, and employment concerns. The current economic difficulties are affecting businesses across the country, particularly small and medium-sized enterprises (SMEs).
The German economy contracted by 0.3% in Q2 2025, with fixed capital formation (investments) dropping by 1.4%, exports declining slightly, and industrial production underperforming [2][3][5]. These figures reflect the ongoing trade conflict with the U.S., where tariffs affecting about 10% of German exports to the U.S. have disrupted trade flows and business confidence [2][5]. SMEs, which heavily rely on export markets and have tighter financing conditions, face heightened uncertainty and risk aversion that constrain their investment and hiring capacity [4].
The economic challenges are causing pressure on both consumers and businesses, leading to job losses and cost-saving measures. Some companies, such as the Swiss Electronic AG, are forced to cut jobs due to the economic situation. The company's production site in Schramberg-Sulgen has seen a 40% drop in sales and lower-than-usual utilization of production facilities [6].
In an attempt to make the job cuts socially acceptable, Swiss Electronic AG has initiated a voluntary program, including reducing working hours, termination agreements, and support for voluntary retirement [6]. However, many other businesses are hesitant to start new projects or hire new staff due to economic uncertainty.
The economic difficulties are particularly impacting sectors such as crafts, hospitality, and retail, which are heavily dependent on consumer spending power. As the rising cost of living, including food, rent, and energy, affects a growing number of households, consumer spending power is decreasing, dampening demand for goods and services [7].
Despite the current weaknesses, there are ambitious longer-term commitments such as the "Made for Germany" initiative, where 61 companies have pledged over €631 billion investment by 2028 across infrastructure and innovation, aiming to boost future competitiveness [1][3]. The German economy is expected to stagnate in 2025 with a possible rebound in 2026 driven by domestic demand recovery and gradual investment increases, provided trade tensions ease and reforms progress [4][3].
In conclusion, the current economic challenges facing businesses in Germany include a contracting economy marked by declining GDP, trade tensions particularly linked to new U.S. tariffs, weak investment sentiment, and rising costs such as energy prices. These factors contribute to subdued private consumption, reduced investments, and employment concerns. However, with significant pledged investments over the medium term, Germany aims to offset current weaknesses and boost future competitiveness.
- The ongoing economic difficulties in Germany have led to increased uncertainty among businesses, particularly small and medium-sized enterprises (SMEs), as they navigate challenges in economic and social policy, such as reduced investments, job losses, and tighter financing conditions.
- To address these challenges, businesses like Swiss Electronics AG are focusing on finance strategies, such as cutting costs through job reductions, reduced working hours, termination agreements, and support for voluntary retirement, to maintain their operations during these economically challenging times.
