War and pandemic burden: Uncertain times for medium-sized companies

The consequences of the Ukraine war are having an increasing impact on German medium-sized companies. The pandemic continues to cause a tense economic situation, as a survey by the state-owned KfW-Bank shows.

Many medium-sized companies are already feeling the economic consequences of the corona pandemic and the Ukraine war. This was the result of a representative survey by the state development bank KfW, based in Frankfurt. After that, there are more and more delivery bottlenecks worldwide, and that endangers the foreign business of many companies.

According to the survey, almost every second medium-sized company in Germany suffers from such delivery bottlenecks. Construction companies and industrial companies are particularly affected, but also retail, for example. Some of the companies are therefore unable to meet delivery dates or have to turn down orders, but most of them still hold on to their employees.

“Supply chains under stress”

According to KfW chief economist Fritzi Köhler-Geib, the fact that the lockdowns in China as part of the zero Covid strategy are causing logistical problems in ports and transport companies in global trade in goods obviously plays a major role – of all things at a time when demand is increasing: “This also means that the supply chains are under stress,” says the economist.

The direct economic ties with Russia and also with the Ukraine in German medium-sized companies are relatively small. According to KfW, significantly fewer medium-sized companies are dependent on the particularly scarce raw materials and preliminary products from China and Russia. “But you also have to take into account that the sword of Damocles of a gas embargo or a gas supply freeze is currently hanging over all developments,” says Köhler-Geib. Rising energy prices were an additional burden. The result: a quarter of companies pass such costs on to customers and increase prices.

Outlook uncertain – companies in “staccato” phase

It is difficult for the KfW experts to estimate how international business will develop this year. It depends, for example, on how long supply chains remain disrupted and what sanctions are still being imposed in connection with the war. The mood in medium-sized companies and also in large companies is suffering from this enormous uncertainty as to how the Ukraine war and the western sanctions will ultimately affect the economy.

Federal Economics Minister Robert Habeck sees German companies in a kind of “staccato” phase during the course of the war. The high energy prices are a burden, there is a lack of skilled workers and the supply chains are no longer functioning properly. “That means it no longer runs smoothly, but there are always raw materials, then it’s produced, then it’s broken off,” said the Green politician in Berlin after consultations with more than 40 small and medium-sized business associations, including crafts, logistics and energy . The federal government had recently announced aid for badly affected companies.