A looming demographic shift and escalating regulatory burdens are threatening the stability of Germany’s vital Mittelstand – its network of small and medium-sized enterprises – according to a recent study by KfW, Germany’s state-owned development bank. The research, compiled from a survey of over 13,000 Mittelstand businesses conducted between February and June 2025, reveals a concerning trend: one in four companies is contemplating closure upon the retirement of their current leadership by 2029.
The potential loss is substantial. Nearly 570,000 businesses, representing roughly 114,000 closures annually, are reportedly poised to cease operations as current owners retire. While 545,000 Mittelstand firms are planning succession arrangements, translating to approximately 109,000 arrangements per year, the gap highlights a critical vulnerability within the German economy.
The primary driver of these closure intentions is the aging owner population. In 2025, a staggering 57% of Mittelstand owners are aged 55 or older, a dramatic increase from just 20% two decades prior. This demographic surge is compounded by a lack of familial interest in taking over the reins, cited by 47% of businesses considering closure. A significant 42% also point to an overwhelming burden of bureaucracy as a key contributing factor, marking a twelve-percentage-point increase in complaints over the prior year and reaching unprecedented levels.
The study also sheds light on the rising value of these businesses as owners seek to transfer them. Businesses planning external sales, a strategy pursued by 42% of those seeking succession, are now aiming for an average sale price of €499,000, an increase from €372,000 just six years ago – a nominal rise of approximately 9.5%.
“Germany’s economy is battling to maintain its international competitiveness” stated Dirk Schumacher, KfW’s chief economist. “The Mittelstand, the backbone of our economy, is facing serious challenges”. Schumacher emphasized the urgent need for increased entrepreneurial activity and specifically highlighted the reduction of bureaucratic obstacles as a crucial step toward fostering new business ventures. He also noted that businesses which have already secured a successor demonstrate renewed investment, implying that resolving succession issues is intrinsically linked to stimulating Mittelstand investment.
The findings underscore a growing tension within the German economic framework. While the government has repeatedly lauded the Mittelstand’s significance, the persistent rise in closure intentions and the intensification of bureaucratic complaints suggest that existing policies are failing to address the core issues threatening this vital sector. The statistics reveal a potential crisis in continuity and investment, demanding a more aggressive and targeted approach to support the Mittelstand’s future.