German small and medium-sized enterprises (SMEs) are increasingly under pressure. Rising energy costs and record-high electricity prices are hitting small and medium-sized businesses particularly hard. While industry is often the focus of political attention, companies in the skilled trades, mechanical engineering, and food production sectors are facing existential threats. According to a study by the Frontier Economics institute commissioned by the German Chamber of Industry and Commerce (DIHK), many of these companies are at risk of financial collapse. Competitiveness is declining, and the performance of these businesses is noticeably deteriorating. (welt; 25.10.25)
Energy costs are destroying economic foundations.
Small and medium-sized enterprises, particularly those in sectors such as electrical engineering, consumer goods manufacturing, and food processing, bear the brunt of these costs. They lack access to the government relief measures that large corporations enjoy. The energy transition is therefore hitting these smaller businesses especially hard. While large industries can offset their costs through economies of scale or by passing them on to consumers, smaller businesses are reaching their limits.
The study clearly shows that the cost pressure of the energy transition extends deep into the economy. Through a so-called trickle-down effect, the burden increases even in sectors that require little energy but are heavily reliant on inexpensive intermediate products and transportation. In Germany, 99.4 percent of companies belong to this group of small and medium-sized enterprises (SMEs), which thus form the backbone of the German economy.
Electricity Prices at an All-Time High
According to calculations by Frontier Economics, electricity grid fees are projected to rise by around 63 percent by 2045. This will confront businesses and retailers in particular with massive additional costs. Every price increase along the supply chain is passed directly on to the consumer price. This creates a vicious cycle in which rising electricity prices burden the entire industry and weaken the domestic market.
The situation is even more critical with regard to gas. Declining consumption means that infrastructure costs are spread across fewer and fewer customers. “As a result, gas network fees for these customers are increasing noticeably,” the study states. For many SMEs, this represents an additional burden that threatens their very existence.
Competitiveness at Risk
According to the study, Germany is among the countries with the highest energy prices in Europe in 2024. Energy-intensive businesses such as laundries and food manufacturers are particularly affected. These companies can hardly pass on rising energy costs to their customers anymore. Frontier Economics draws a bleak conclusion: “Under the current circumstances, some industries in Germany are at acute risk of not surviving the continuation of the energy transition.”
Even less energy-intensive sectors are feeling the consequences. In the construction industry, the hospitality sector, and retail, higher operating costs are driving up prices. This reduces purchasing power, and the competitiveness of the entire economy is jeopardized. SMEs bear the brunt of this development, which threatens the foundation of prosperity.
Industry Demands Political Relief
The deputy managing director of the German Chamber of Industry and Commerce (DIHK), Achim Dercks, is calling for a clear change of course. The current approach is jeopardizing not only heavy industry but also small and medium-sized enterprises (SMEs). The federal government must lower the electricity tax for all companies – not just for the manufacturing sector.
The supplementary Frontier Economics analysis, “Plan B: New Paths for the Energy Transition,” estimates total costs of up to 5.4 trillion euros by 2049. Without fundamental reform, a dangerous spiral of rising electricity costs, declining competitiveness, and growing uncertainty is looming. For SMEs, the backbone of the German economy, the energy transition has long since become a matter of survival.