More than a million jobs could be lost this year in small- and medium-sized enterprises (SMEs) – the backbone of the German economy – due to the coronavirus pandemic, a study showed on Thursday, October 22.
In its annual survey of the “Mittelstand” sector, the public investment bank KfW estimated that SMEs could shed some 3.3% of their workforce by the end of the year, equivalent to some 1.1 million jobs.
There are an estimated 3.8 million such companies in Germany – predominantly family-run businesses specialized in sectors such as manufacturing, often for the export market.
They employ around 60% of workers – 32.3 million in 2019 – and its share in Germany’s overall economic activity is more than 71%.
KfW said that the coronavirus pandemic was leaving “deep marks” on the SME sector.
“Worries and uncertainty are always high. Sales are breaking down more than in the financial crisis,” it said.
The historic recession into which the virus lockdowns plunged Europe’s biggest economy and the anxiety about the recovery are impacting the outlook this year for SMEs, KfW wrote.
“More than one out of every two SMEs – some two million companies – are expecting a drop in revenue,” with a 12% drop expected for the sector as a whole, equivalent to 545 billion euros.
KfW signaled that companies were also holding off investments projects due to “uncertainty and tight funds.”
By the end of August, Germany had already lost 670,000 jobs, with “very pessimistic” macroeconomic forecasts pointing to a difficult final quarter.
Earlier Thursday, data showed consumer confidence had sunk heading into November as fears rise of further restrictions to curb the spread of the pandemic.
As part of a vast support plan from the German government, KfW has paid out 55 billion euros in aid since April to companies in difficulty.
The current climate of “great uncertainty” must be countered by “targeted economic policy measures,” the study concludes. – Rappler.com
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