GERMANY: Who's afraid of the Mittelstand?

GERMANY: Who's afraid of the Mittelstand? - Everyone needs role models. Nobody has better service industries than the Americans. When it comes to miniaturisation in consumer electronics we cast an eye to the Far East. And when one looks for a model of a

Everyone needs role models. Nobody has better service industries than the Americans. When it comes to miniaturisation in consumer electronics we cast an eye to the Far East. And when one looks for a model of a strong and successful small and medium-sized business sector, Germany's famous Mittelstand (group of middle-tier companies) has traditionally provided it. But look a little closer and the picture looks very different. The Mittelstand is labouring through a period of weakness and retrenchment and there has probably never been a better time for Britain's SMEs to get in ahead of their German equivalents in key export markets. There is strong evidence that this has already been happening in the single market. Germany exports nearly twice as much to its EU neighbours as the UK does, but the latest data shows that the gap was reduced by nearly 30% in 1996 alone. The strength of sterling will have taken a little of the shine from that performance in 1997, but with UK export growth outstripping that of Germany in 11 out of 13 EU member states the signs are very good.

The Mittelstand, Germany's legendary sector of three million mainly family-owned small and medium-sized firms employing up to 500 people, most of them in manufacturing, has been credited with doing a great deal for the country's success in the 50 years since the war, including the famous Wirtschaftswunder (economic miracle) of the 1950s. Some economists say they have contributed far more to that success than bigger names such as Siemens, Bosch, Bayer, Volkswagen, Mercedes and BASF. For this reason, and because few of them are household names, they have been described as Germany's 'hidden champions', typically involved in the manufacture of specialist equipment, such as labelling machines for bottles, or specialist components, such as metal filters or car parts.

The Mittelstand remains very important, accounting for about half of Germany's industrial turnover, two-thirds of industrial jobs and, crucially to an economy built on training and skills, the lion's share of apprenticeships.

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