Most small and medium-sized enterprises (SMEs) in Germany are anticipating a halt in wage and salary increases this year, according to a KfW SME Panel survey. Of the 3,165 enterprises surveyed, 47% expect wages to remain stable, while 9% predict a decline. However, 37% anticipate an increase of up to 10%, and 7% believe the rise will exceed 10%.
The survey, which KfW Research conducted online in January in collaboration with the Deutsche Bundesbank, revealed that wages constitute about 35% of SMEs' total costs—a 2% rise from April 2024.
Many businesses are now finding it financially challenging to manage current costs. In April 2024, 69% found costs acceptable, but by January 2025, this figure had fallen to 58%. Dr. Elisabeth Grewenig from KfW Research noted that "a much higher number of businesses than last year are now at breaking point when it comes to costs."
Especially affected are the construction and services sectors, where a decrease in the share of enterprises finding costs acceptable has been noted, coupled with an increase in those feeling financially overwhelmed. These sectors, known for being labor-intensive, have wage costs at 34% and 39%, respectively.
While more SMEs expect costs to stabilize this year, Dr. Grewenig suggests this could "stabilize the situation for many businesses."
Further insights into Germany's economic standing and strategies for future stability are discussed in KfW Research's position paper, “Managing the transition, strengthening growth,” which provides analyses and policy recommendations.