EU single market as a crisis anchor

Industrial SMEs view the current geopolitical crises and conflicts with great concern and are taking initial precautions: It is true that China generally remains important for entrepreneurs as a procurement market - not least because the country holds a monopoly-like position for some raw materials. However, the country is being viewed increasingly critically. Accordingly, other Asian countries are moving into focus as possible alternatives, as the online survey conducted by IfM Bonn in early summer 2023 shows. Over 1,800 managers from industrial companies took part. In the fall, representatives of chambers and trade associations were also interviewed about companies' activities abroad.

"North America is becoming increasingly important, especially for exporting companies. However, the EU internal market remains the most important market, especially for SMEs, due to the high level of legal certainty and reliable framework conditions. In contrast, trade in goods with the UK has become noticeably less important since Brexit," reports study director Hans-Jürgen Wolter. From an economic perspective, he recommends further strengthening the EU single market politically, reducing bureaucratic hurdles in a targeted manner and consistently implementing the "think small first" premise when designing new regulations. At the same time, the freest possible (global) trade should be promoted again, for example in the form of free trade agreements, so that companies have more planning security and can make optimal investments in the long term.

According to the IfM Bonn survey, only a few company managements are looking to relocate production sites abroad. Nevertheless, the tendency to set up new production facilities abroad has increased - even among SMEs. "Depending on the extent to which this trend is also reflected in future investment decisions, this could lead to a reduction in the proportion of value added by industry in Germany in the long term," fears Hans-Jürgen Wolter.

Source: Institute for SME Research (IfM) Bonn