According to a new PwC survey of 150 executives, the crisis in the mechanical engineering sector is intensifying significantly. Only about one in ten companies now expects positive economic development in Germany. High costs, weak demand, geopolitical tensions, and supply chain risks are weighing on capacity utilization, investment, and planning certainty; consequently, smaller firms and their employees, in particular, are facing a strained situation.
Mechanical engineering crisis hits small firms hardest
The industry climate has cooled significantly over the past three months. At the start of the year, more than a quarter of respondents still viewed the future positively; now, however, only a small minority remain optimistic. PwC also reports an average industry forecast of minus 3.6 percent.
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Capacity utilization has fallen to an average of 79.9 percent. This places it below the threshold at which many companies struggle to cover fixed costs. Furthermore, one in three companies operates below this average, while only about one in five is running at full capacity.
Costs Erode Reserves and Investments
The crisis in the mechanical engineering sector is most evident in costs. Nine out of ten companies identify rising expenses as their biggest obstacle. At the same time, higher sales prices are often insufficient to offset the costs of personnel, energy, materials, and financing.
Small and medium-sized enterprises (SMEs), in particular, have less of a financial buffer. PwC expert Bernd Jung warns that a simple cost-cutting program is often inadequate. Productivity is the decisive factor, yet many SMEs have too little leeway in this area.
Orders and Production Offer No Signs of Relief
Industry association data also show no signs of a robust recovery. The VDMA reports a 2.6 percent decline in real production for the period from January to April. Consequently, the association has lowered its forecast for 2026 to zero growth.
Official figures on incoming orders align with this picture. Destatis reports a 7.4 percent month-on-month drop in orders for the mechanical engineering sector in April. Industrial orders from the Eurozone, in particular, fell sharply, whereas orders from outside the region saw a slight increase.
Why the consequences extend beyond the sector
The mechanical engineering industry supplies machinery, components, and automation systems to almost every industrial sector. Moreover, the industry employs more than 1.2 million people in Germany. Consequently, the crisis in mechanical engineering serves as an indicator of the health of Germany’s industrial base.
For employees, the risk emerges gradually. Initially, overtime and investment levels decline, followed by short-time work, halted projects, or job cuts. The decisive factor will therefore be whether incoming orders, energy prices, and financing costs show a genuine turnaround in the second half of the year.
Author: Blackout News
Sources: PwC (30.06.26) – Welt (30.06.6) – Finanznachrichten (25.06.26) – My Factory (26.06.26) – BDI (22.06.26)