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SMEs determined to double profit growth

The business of German small and medium-sized entities (SMEs) is booming. Companies from almost all sectors of the economy significantly raised their growth and profitability projections for the year 2008. As compared to a similar survey a year ago companies expect profit growth to double from on average 5.0% to 9.3%. Sales are forecast to grow from 7.6 to 9.8%. Thus, this growth of SMEs is four times as big as that forecast for the German GDP and twice the growth figure predicted for the global economy.

In total, one in five German SMEs expect above-average growth in turnover and profitability of more than 10% respectively. These are the findings of the most recent SME-barometer by the candidus consulting firm in co-operation with the Wirtschaftswoche and the Handelsblatt magazines.

In particular the motor vehicle industry benefited from the boom year 2007. For the year 2008 motor vehicle manufacturers expect turnover to grow by about 11% which is twice the figure of last year. Furthermore, they also expect profits to grow significantly from 3.9% in 2007 to 10.0% in the current business year. Profitability is expected to grow even more in civil and plant engineering. In this sector companies expect profit to grow by 11.6%. This growth is almost 7 percent stronger when compared with the growth 2007. The only sectors which slightly lowered their turnover growth projections are the media and technology businesses as well as businesses from the chemical and pharmaceutical industry.

The reasons for the success of SMEs are a prompt implementation of product innovations and internationalization. Thus, 80% of SMEs make efforts to increase their commitment on international markets in order to generate more turnover. The focal areas in this respect are the East European markets of Russia, Rumania and Bulgaria. 91% of companies interviewed want to gain a competitive edge by product innovation thus driving their growth rates.

80% of businesses surveyed invest in more modern IT systems and better professional competence. By doing so companies aim at reducing their vulnerability to short-term fluctuations in business activity even further. Surprisingly, however, is the fact that in spite of the current environment and energy discussion only 43% of SMEs see an urgent need for action in this field.

When asked about the years to come, however, SMEs are cautious: for the time after 2008 the majority of them expect growth to be less dynamic. In particular those companies in which turnover and profit will grow in 2008 are already now preparing for a possible economic slowdown.

In total 303 executives and specialists took part in this survey in the period from June to September 2007. GERMAN