In 2025, supplier companies recorded a 1.1 per cent decline in turnover, while production fell by 1.0 per cent. This marked the fourth consecutive year of shrinking output. Excluding the post-pandemic recovery year of 2021, developments since 2019 reveal a structurally downward trend.
2026 begins without signs of recovery
At the start of 2026, ArGeZ still sees no indication of a lasting improvement. In the first two months of the year, employment was down 3.4 per cent compared with the previous year. The slight positive trend seen at the end of last year did not continue. Instead, production among German suppliers fell again by 0.4 per cent after the first two months. This development is also reflected in the ifo business climate index: in March 2026, the seasonally adjusted figure dropped from minus 14.4 points in February to minus 24.1 points. The cautious stabilisation at a low level therefore came to an abrupt end.
Both the assessment of the current situation and expectations for the next six months deteriorated significantly in connection with the military conflict in Iran. “Only around one in ten suppliers rates its current situation as good, while just 16 per cent of the sector expect improvement over the coming six months. Sentiment therefore remains clearly negative,” explains ArGeZ spokesperson Christian Vietmeyer.
Weak demand, rising imports
One key reason remains persistently weak demand from important customer industries. Incoming orders are fluctuating sharply, while external burdens are adding further pressure. Geopolitical tensions and trade policy uncertainties are having a dampening effect, while rising energy prices are increasing costs and making investment more difficult.
International competitive pressure is also intensifying. While Germany’s supplier industry struggles for stability, imports in important product groups are rising significantly. Imports of iron and steel goods in 2025 were around ten per cent higher than in the previous year. Growth was even stronger for many automotive components.
Industry calls for policy shift in Berlin
The supplier industry still expects “a bold and forward-looking economic policy turnaround” from the German government. Key problems facing suppliers remain unresolved. Compared with international competitors, high labour costs are pushing many companies out of the market and encouraging production relocations to lower-cost countries. According to ArGeZ, possible ways to reduce labour costs include longer working hours and lower sickness absence rates. In addition, non-wage labour costs should be limited to a maximum of 40 per cent. Effective investment incentives and support measures are also needed to enable productivity gains through automation and new technologies, while at the same time supporting the path towards climate neutrality.
The industry also continues to see a need for action on energy prices. The promised relief for industry has so far barely been felt. Many supplier companies do not benefit from the reduction in electricity tax. The so-called industrial electricity price lowers power costs for manufacturing businesses by only one to two cents per kilowatt hour, or around ten per cent on average. Federal subsidies for grid charges also do not provide relief in every network area. Overall, this is not enough to create internationally competitive energy prices, ArGeZ says. For many industrial heating processes, gas remains indispensable due to the lack of available alternatives. At the same time, SMEs are burdened by the national CO₂ price, which applies only to German companies. In ArGeZ’s view, the national CO₂ price should be suspended in order to ensure a level playing field within the single market.
