Germany's Digitalization Offers Big Business Opportunities

13 December 2022 | 3 minutes

The new German government is committing serious resources make the country a #digital leader. #Companies like fintech unicorn Qonto are taking advantage

Digitalisation in German enterprises is gaining momentum. The business survey 2018 which KfW has conducted together with umbrella organisations as well as professional and regional business associations has revealed that more than half of enterprises (53%) are planning to carry out digitalisation measures in the next two years. In last year’s survey that share was just 42%. The share of enterprises that have no plans for digitalisation projects has dropped by nine percentage points to 25%.

How much enterprises invest in digitalisation depends on their size. Large enterprises with annual turnover in excess of EUR 50 million have taken the lead, and 87% of them have firm plans for digitalisation investments. The corresponding share of small enterprises with up to EUR 1 million annual turnover is 32%. Broken down by sectors, manufacturers as well as wholesalers and exporters are particularly active, with 69% and 68%. Manufacturing firms plan to digitalise their production facilities in particular. Wholesalers and exporters, on the other hand, are focusing on connecting with other enterprises.

The main driver for enterprises planning to invest in digitalisation is to achieve efficiency gains, for example by linking IT systems between business areas (56%) and in production (55%). Only 34% of them invest in digitalisation to harness opportunities to tap into new markets with the aid of new digital products, services and business models.

The Chief Economist of KfW, Dr Jörg Zeuner, commented on the findings as follows: “Digitalisation offers the opportunity to increase growth and productivity and helps to ensure Germany’s competitiveness into the future. To learn that enterprises are investing more in digitalisation is therefore good news to begin with. But using it merely to improve the efficiency of existing business is not enough. Rather, enterprises should focus much more strongly on the opportunities digitalisation provides for different or new business models and markets. This is the actual challenge that has to be met in order to remain competitive in future.”

Only few enterprises use loans to finance their digitalisation projects. A mere 9% of enterprises conduct loan negotiations with the aim of using debt capital to finance digitalisation projects. One reason for this is probably the fact that enterprises so far tend to spend small sums on their digitalisation projects and can get the funds they need from internal sources. Larger enterprises are more likely to conduct loan negotiations on digitalisation projects.

It is generally more difficult for enterprises to obtain loans for investments in digitalisation than for other investments such as plant and machinery. In enterprises seeking to apply for a loan to finance digitalisation projects, the likelihood of them describing access to credit as “difficult” or “very difficult” is 13.7%. Thus, the likelihood is a good two thirds higher than for loans for other types of investment.