When the COVID-19 crisis became evident in Europe, Germany put strict measures in place beginning mid-March, including school closures and store lockdowns. The government gradually began relaxing those measures at the end of April. By mid-May, all shops and stores, regardless of their size, reopened with certain conditions in place. Though the federal and state governments are trying to reopen the German economy, nine weeks of lockdown have had a tremendous effect on enterprises of all sizes, including the German Mittelstand. As a category, these businesses account for 57.6 percent of employment in the country and 34.4 percent of national revenues. There are 2,700 “hidden champions” worldwide – almost half of them are German Mittelstand enterprises.
The crisis has called many things that have long seemed natural in the German business landscape into question. It has also revealed the necessity to make structural changes and innovate within the German economy. Among these structural changes is the need to digitalize. A recent analysis by McKinsey indicates that if the German economy continues its digital structural changes and if the damage done stays within the projected range, by 2028 it will be able to return to the growth path it would have been on had the pandemic never occurred.
McKinsey sought to better understand the economic impact of the COVID-19 crisis on the Mittelstand given its significant structural relevance to Germany’s economy. A comprehensive survey of Mittelstand enterprises shed light on their outlook, key success factors in mastering the shutdown, and the way out of the crisis. Our key findings are summarized in this document.