Small and medium-sized businesses and family-owned companies in rural areas are key drivers of success for their regions: They provide attractive jobs, offer training and continuing education, pay taxes to the public coffers, are innovative contributors to the local economy, support the arts, culture, and sports, and are committed to integration and inclusion. For Germany, this brings strength across the board and contributes to equitable living conditions.

Loyalty to a specific location risks becoming a competitive disadvantage

Inadequate transportation infrastructure—including roads, railways, bridges, and locks—is putting increasing pressure on industrial small and medium-sized enterprises. Companies operating within deeply integrated and cross-border value chains rely on efficient logistics processes from every business location.

In many rural areas, broadband coverage is sufficient, at best, to allow a few employees to participate in video conferences simultaneously. Comprehensive digital processes and Industry 4.0 cannot be guaranteed under these conditions. The goal is to ensure the competitiveness of companies across the country and to finally connect all of Germany to the opportunities of the 21st century.

Energy infrastructure also poses challenges. To give just one example: If, as part of the green transition, energy or process heat is to be generated from hydrogen in the future, how will we ensure reliable and high-capacity connections—even for businesses in regions outside the planned “core network”?

Qualified personnel are hard to find or difficult to retain in many rural areas. Most small and medium-sized businesses take a great deal of initiative on their own to attract and retain staff. However, they also depend on attractive educational infrastructure in the region. All too often, young people move away because modern educational opportunities are lacking in rural areas. Combined with the effects of demographic change and insufficient public investment in the future, this contributes to the isolation of entire regions. This jeopardizes social stability, social cohesion, and political tolerance.

“You can buy machines, but not technology. A qualified workforce is crucial. That’s why, in our owner-managed, medium-sized company, we place great value on good training and continuing education. With the experience and ideas of our employees, we secure the future of our company and our region. And we’ve been doing so for 200 years,” emphasizes Gerd Röders, managing partner of G.A. Röders GmbH & Co. KG in Soltau.

Leveraging the advantages of rural areas, reducing bureaucracy, and streamlining planning procedures

To expand infrastructure, states and municipalities must also have the financial capacity to act, and administrative bodies must operate with less bureaucracy—for example, when designating commercial and residential development areas. The relatively streamlined structures of rural regions offer the potential to implement ideas more quickly. Excessive regulations at the federal level should not undermine pragmatic local solutions—not least to keep the next generation of entrepreneurs in the area with confidence and enthusiasm.

Strengthen success factors

Politicians have taken up the issue of “rural areas,” but the proposed measures do not adequately address the challenges. It is long overdue to place a stronger political focus on this issue—without romanticizing rural life and the rural economy. After all, rural regions account for about 46 percent of Germany’s gross value added and are home to about 57 percent of the population. The Federal Government’s 2024 Equality Report, in turn, highlights the federal diversity of economic indicators—and how regionally varied the opportunities and challenges for future development and prospects are.

Anyone who wants to preserve small and medium-sized industrial businesses as a key factor for success in rural areas should:

• establish state-of-the-art infrastructure across the board in the digital, transportation, and energy sectors
• offer educational opportunities nationwide and ensure a supply of skilled workers
• apply the principle of subsidiarity to facilitate pragmatic local solutions and prevent excessive federal regulations, such as those governing the designation of commercial zones
• engage even more closely with entrepreneurs in rural areas to understand the needs of local businesses