One in three companies plans to cut jobs in 2026.

The economic situation will remain tense in the new year: As the latest business survey by the German Economic Institute (IW) shows, one in three companies plans to reduce staff in 2026. Companies are also hesitant to invest.

After a brief recovery in spring 2025, economic sentiment has recently deteriorated again, as a new IW business survey shows. This has consequences for the labor market: 36 percent of companies plan to cut jobs next year, while only 18 percent plan to create new ones. The outlook is particularly bleak in the manufacturing sector: 41 percent of the surveyed companies intend to reduce staff, and only about one in seven industrial firms plans to create new jobs. For the survey, the IW interviewed nearly 2,000 companies in October – three-quarters of them expect to produce less or at most the same amount in 2026 as they do now.

Investments are also expected to decline: Only 23 percent of companies plan to invest more next year than in 2025, while 33 percent intend to invest less. This exacerbates the investment crisis in Germany: The IW's nationwide business survey has not recorded a period of negative investment expectations lasting more than five six-month periods since its inception.

Regionally, assessments vary widely. Optimism prevails in the north and in Bavaria, where many companies expect production to increase in 2026. In the rest of the country, a pessimistic outlook prevails – particularly in the northeast: Here, almost half of the companies expect a decline in production, while only 17 percent anticipate improved business.

“Job cuts instead of economic turnaround: Companies are suffering under the immense geopolitical stress,” says IW economic expert Michael Grömling. Added to this are homegrown problems – high costs for energy, social security, and bureaucracy. “Without government reforms, it becomes increasingly unlikely that the federal government’s multi-billion-euro special programs will have the hoped-for and necessary effect.”