Industry associations survey points to looming workforce reductions as weak exports and economic headwinds persist.

German business groups are ending the year on a sombre note. As December draws to a close, a broad survey of industry associations suggests that many companies are preparing for job cuts in 2026, reflecting deepening concerns about Germany’s economic outlook and its position in an increasingly competitive global market.

The findings, compiled from responses across manufacturing, chemicals, engineering, automotive supply chains and export-oriented services, point to a shared expectation: employment levels are likely to come under pressure if current conditions fail to improve. Business leaders describe a climate marked by cautious investment, subdued demand from abroad and rising structural costs at home.

At the heart of these concerns lies Germany’s long-standing reliance on exports. For decades, strong foreign demand has underpinned industrial employment and wage growth. That engine, however, has been sputtering. Associations report that key overseas markets remain weak, with sluggish growth in Europe and heightened uncertainty in global trade weighing on order books. Companies that once relied on steady export flows now face volatile demand and shorter planning horizons.

Executives also point to intensifying international competition. Firms in Asia and North America are expanding capacity, often benefiting from lower energy prices, faster permitting procedures and more generous industrial subsidies. German producers, by contrast, say they are grappling with high electricity costs, complex regulation and a slow pace of infrastructure modernisation. These factors, they argue, erode competitiveness and make labour cost adjustments increasingly likely.

The anticipated job cuts are not described as abrupt mass layoffs, but rather as gradual workforce reductions. Associations expect companies to rely on hiring freezes, non-replacement of retirees and selective restructuring. Even so, the signal is clear: after years of labour shortages in some sectors, the balance of risks is shifting toward employment contraction.

Small and medium-sized enterprises appear particularly vulnerable. Unlike large multinationals, many Mittelstand firms lack the financial buffers to absorb prolonged downturns. Industry groups warn that sustained weakness in orders could force smaller suppliers to reduce staff more quickly, with knock-on effects across regional economies that depend heavily on industrial clusters.

Trade unions have responded cautiously to the survey’s conclusions. While acknowledging the economic headwinds, labour representatives stress that premature job cuts could undermine domestic demand and worsen the slowdown. They are calling for greater use of short-time work schemes and targeted public investment to stabilise employment during the downturn.

Economists note that the survey underscores a broader challenge for Europe’s largest economy. Germany is navigating a complex transition, balancing decarbonisation, digitalisation and demographic change while facing geopolitical uncertainty and shifting trade patterns. Employment, once a pillar of resilience, is now emerging as a pressure point.

Looking ahead to the turn of the year, business groups are urging policymakers to act swiftly. Their demands include measures to reduce energy costs, accelerate planning approvals and strengthen export promotion. Without such steps, they warn, companies may have little choice but to trim payrolls to remain viable.

As the year closes, the mood among German employers is one of guarded realism rather than alarm. Yet the message from industry associations is unmistakable: unless economic conditions improve, the labour market may feel the strain in the year ahead, marking a significant shift for an economy long associated with industrial stability and employment security.