A looming demographic shift and escalating regulatory burdens are threatening the stability of Germany’s vital Mittelstand, the country’s renowned small and medium-sized enterprises, according to a recent assessment by KfW, Germany’s state-owned development bank. The KfW Mittelstandspanel analysis, revealed through reports in the Funke-Mediengruppe publications, paints a concerning picture: one in four Mittelstand businesses are actively considering closure following the retirement of their current leadership.
The data indicates a significant imbalance in succession planning. Nearly 569,000 businesses anticipate closure by the end of 2029, representing an annual attrition rate of approximately 114,000. While 545,000 companies are currently planning a succession strategy, translating to roughly 109,000 annual transitions, this disparity raises serious questions about the long-term health of the German economy.
The primary driver behind these closure plans is the aging of the Mittelstand’s leadership. As of 2025, a staggering 57% of Mittelstand owners were aged 55 or older – a dramatic increase from just 20% two decades ago. Contributing significantly to this trend is a lack of familial interest in carrying on the business; 47% of those contemplating closure cite a lack of enthusiasm from their children as a key factor.
Adding further complexity is a growing wave of bureaucratic frustration. A worrying 42% of businesses planning to cease operations now point to excessive bureaucracy as a decisive factor – a 12-percentage-point increase year-on-year and the highest recorded level. This escalating regulatory burden appears to be stifling entrepreneurial spirit and deterring future generations from entering the Mittelstand landscape.
For those businesses opting for a succession solution, a sale to an external party is increasingly common, with 42% considering this route. The perceived value of these businesses has also seen substantial growth; businesses anticipating a succession within the next five years are now seeking an average sale price of €499,000, up from €372,000 just six years prior – a real increase of approximately 9.5%.
“Germany’s economy is grappling with its international competitiveness” stated Dirk Schumacher, KfW’s chief economist. “The Mittelstand is the backbone of our economy and its continued existence is essential”. Schumacher underscored the urgent need to stimulate entrepreneurial dynamism within Germany, identifying bureaucratic reduction as a critical first step toward fostering new business ventures. He also highlighted the positive correlation between successful succession planning and renewed investment within companies, arguing that resolving the succession crisis is crucial for stimulating overall investment within the Mittelstand sector.
The KfW analysis, based on a survey of over 13,000 Mittelstand businesses conducted between February and June 2025, reveals a critical juncture for Germany’s economic model. Policymakers face the challenge of not only creating a more business-friendly environment to encourage successors but also addressing deeper structural issues that are deterring younger generations from embracing the legacy of the Mittelstand.
