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German mid-sized companies upbeat despite low investments

Germany's small and medium-sized enterprises (SMEs) are the backbone of the economy. A fresh report has shown they're looking to the future with more confidence again, but investment volumes are low.

Germany's second largest lender, Commerzbank, has polled 4,000 small and medium-sized companies and 70 economists about their assessment of the business environment and their medium-term expectations.

Most of those companies have a turnover of less than 50 million euros ($61.5 million) per year, ranging from 2.5 to 250 million euros. The study reveals that more than half of the respondents - 53 percent - are making long-term plans again and are willing to take higher corporate risks. It's a marked improvement from the level reached in 2012, when only 38 percent were engaged in long-term business schemes.

"The basic outlook is more upbeat and robust now," the director of the Cologne Institute for Economic Research (IW), Michael Hüther, said in a statement. "But that's no longer adequately reflected in companies' investment activities.

More than half of the economists polled for the survey believe investment volumes are insufficient.

"Compared with the US, German SMEs have shown weak investment activities since the turn of the millennium," Hüther told DW.

Entrepreneurs pleased

He admitted, though, that investment levels were even lower in the eurozone's crisis nations as well as in Italy and France. "But Germany does not exactly excel, given the robust economy and labor market and the sound budget we're credited with abroad," Hüther commented.

A German region brimming with mid-sized companies

But entrepreneurs appear to have a different take on this. Some 75 percent of them are satisfied with their maintenance investments, while 73 percent are happy with their growth-related investments. It's not a matter of financial resources, as only 17 percent of respondents say they're having financing problems, and two thirds intend to make required investments without falling back on loans from banks.

Senior Commerzbank executive Markus Beumer, for his part, is certainly interested in seeing companies resort to bank loans.

"Many firms are only partially using their credit lines," he complained during a presentation of the study on Wednesday. "We've noticed that companies have identified few attractive investment projects domestically and hence prefer to put their money into projects abroad."

Trends are rarely heeded

According to the study, there are several reasons for the restraint shown on the home front. Among them are highly volatile raw materials and energy prices, a lack of skilled labor as well as red tape or unsafe legal conditions in the country they're investing in.

IW Director Michael Hüther also cites Europe's slow economic recovery and weaker cyclical developments in emerging nations. And he's found out that small and medium-sized companies are unlikely to jump on the bandwagon when it comes to general trends in various sectors of the economy, including the drive towards "Industry 4.0" where intelligent factory units are supposed to react independently to changes in the production process thanks to a high level of digitalization.

"That was a major topic at the recent international industry fair in Hanover, and you keep hearing about it," Hüther says. "But if you take a closer look, for most companies that's not really a thing yet they'd be able to relate to right now."

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