The Mittelstand in Germany is a crucial part of the country’s economy, consisting of small and medium-sized enterprises (SMEs) that are typically family-owned and play a significant role in driving innovation and growth. These companies contribute around 27 per cent of total company turnover and employ more than half of the workforce in Germany.
Unlike large corporations in Germany that have faced challenges such as high energy costs and disruptions in global trade, the Mittelstand has shown resilience by focusing on high-tech and niche markets. While Chinese companies may excel in producing certain goods, German SMEs stand out in manufacturing delicate mechanical components and high technology items that require precision and expertise.
In the UK, there are companies listed on the London Stock Exchange that mirror the success of German SMEs. One such company is Goodwin (GDWN), a traditional yet forward-thinking business based in Stoke-on-Trent. With a strong emphasis on research and development, Goodwin has seen significant growth in turnover and profit, showcasing the benefits of investing in innovation.
Renishaw (RSW) is another UK company known for its specialised metrology equipment and strong founder ownership. Following the passing of one of the co-founders, investors are anticipating potential changes in ownership that could impact the company’s future performance.
Spectris (SXS), a precision measurement company, has also attracted attention for its impressive earnings growth despite a lower price/earnings ratio compared to the sector average. The recent acquisition of Piezocryst Advanced Sensorics could provide a boost to Spectris’ growth trajectory and improve investor sentiment.
Overall, investing in niche, high-value companies like Goodwin, Renishaw, and Spectris can offer unique opportunities for UK investors. Keeping an eye on these companies and monitoring their performance could lead to interesting special situations in the coming year. As the manufacturing sector continues to evolve, these companies have the potential to deliver strong returns and drive innovation in the market.