KfW: Mittelstand cuts digital spending by eight billion
3 min read
Seven in ten businesses completed no digital project over three years. Spending fell by around eight billion euros. Those with an existing digital foundation get more from the next euro.
Key takeaways
- Participation: 30 percent of firms completed a digital project between 2022 and 2024, five points fewer than before. That means around 200,000 fewer businesses, with just under 1.2 million still active.
- Budget: Spending fell to just under 24 billion euros in 2024. Active firms still spent around 25,000 euros on average.
- Gap: Businesses with 50 or more employees spend almost 19 times as much as the smallest firms. Before the pandemic, the ratio was 17 to one.
- 90 days: A stated deadline, a named owner, a measurable metric. Without these, the next outlay achieves nothing.
Related: Mittelstand slows investment despite the need · Financing climate Q2 2026: Tight lending, available capital
What is digital capital? KfW includes spending on software, IT infrastructure and digital applications. The accumulated stock represents a firm’s digital capital. Physical investment in machinery and buildings sits alongside this foundation; it does not replace it.
The next euro has unequal impact
KfW’s survey for 2022 to 2024 is the fifth wave of the KfW-Digitalisierungsbericht Mittelstand. Seven in ten businesses completed no digital project during those three years. The participation rate fell five points to 30 percent. Around 200,000 fewer firms than in the previous wave; just under 1.2 million remained active. The slump affects every group surveyed within the German Mittelstand. Participation fell most sharply in research-intensive manufacturing (down 12 percentage points) and internationally active companies (down 6). Regionally active firms and businesses conducting their own research lost only three points.
Digitalisation spending fell by 8.1 billion euros to 23.8 billion euros in 2024, a decline of 8.6 billion after inflation. Firms still completing projects maintained their budgets. Active firms still spent around 25,000 euros on average in 2024. Total spending is falling because fewer businesses finish projects. Physical investment stood at 256 billion euros. Digital spending thus represents around one-eleventh of conventional investment.
The gap remains rooted in the foundation
ZEW and KfW measure this foundation as digital capital. Ten percent more digital capital is associated with around 0.16 percent higher labour productivity on average. In the top quarter, the figure is around 0.81 percent, roughly five times as much. This group holds around 157,000 euros in digital capital. A new tool achieves little without a foundation. The next euro has impact where software, infrastructure and applications already exist.
| 2024 measure | Small firms | 50 or more employees |
|---|---|---|
| Average digital budget | just under 10,000 euros | just under 189,000 euros |
| Gap | Factor of 19 | factor of 17 before the pandemic |
Source: KfW-Digitalisierungsbericht Mittelstand 2025, April 2026.
Relative to revenue, costs weigh more heavily on small firms. KfW identifies barriers including a shortage of IT specialists and a lack of broad digital skills, financing, strategies without implementation, infrastructure, data security and data protection.
90 days, three metrics
The report describes the situation. Each firm must set its own plan. Knowing just one figure after 90 days means there is still no plan. Three metrics offer a starting point: existing digital capital, the next completed project and the gap with comparable firms.
| Deadline | Focus | Metric |
|---|---|---|
| 30 days | Existing digital capital | Software, infrastructure and applications already in the business |
| 60 days | One completed initiative | A dated project that would count in the next KfW survey wave |
| 90 days | Gap with comparable firms | Budget and digital capital compared with firms of equal size |
Source: Derived from the KfW-Digitalisierungsbericht Mittelstand 2025; deadlines set by the editorial team.
Without an owner and deadline, the next budget item remains a planning figure. The report shows that the foundation determines impact before the next project delivers. Firms tracking these three metrics with deadlines and owners will have a figure after one quarter to compare with the next KfW survey wave.
Frequently asked questions
What does KfW count as a digitalisation project?
Completed projects involving software, IT infrastructure or digital applications. Projects underway or planned do not count towards this rate.
Why is total spending falling if active firms keep investing?
Because fewer firms complete projects. Those remaining active in 2024 maintained their digital budgets. The decline reflects fewer participants.
What does this mean for a firm with fewer than five employees?
The budget in 2024 was just under 10,000 euros, compared with just under 189,000 euros for firms with 50 or more employees. Small firms bear a greater burden relative to revenue. The first euro invested in the foundation matters more than the twentieth spent on an additional application.
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Translated from the German original using artificial intelligence. The German version is authoritative.
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