German FAZ: Small companies with big worries008401

Volkswagen, Thyssen, Bosch – when people talk about the economic crisis and job cuts in Germany, the focus is on the large industrial companies. However, medium and small companies are also under considerable pressure. This is shown by the new Datev SME index, which the F.A.Z. reported in advance. The sales of these companies, which in terms of number make up around 99 percent of the companies in this country, fell by 4.7 percent in November compared to the same month last year. The medium-sized business index is based on the anonymized sales and business data that Datev, the IT service provider for the tax advisory profession, records and processes. The sales of small and medium-sized companies have recently developed weaker than the sales in the economy as a whole. However, the picture in November was not uniform. The sales of medium-sized companies (up to 249 employees) grew by 2.5 percent in November compared to the previous year. The Datev analysts described this as a “ray of hope”. The situation is stabilizing somewhat among small companies (up to 49 employees), and the sales gap compared to the previous year shrank for the third month in a row. However, micro-enterprises (up to nine employees) are far from this. Here the decline in sales has become even worse and is now 6.8 percent compared to the previous year.

Datev SME Index: Sales

Although there was a minimal improvement compared to October, the expected upswing from pre-Christmas business did not materialize. Retail did worse business in November than in October. Datev CEO Robert Mayr sees no trend reversal. “The slight recovery in sales among medium-sized companies should not obscure the fact that micro and small companies are still struggling with sometimes significant declines in sales.” The situation of small companies is a cause for great concern. Wage development is still above the inflation rate. Companies’ financial leeway will be lower because falling sales are accompanied by higher wages. In November, the annual increase was weaker than in previous months. With an increase of 3.8 percent, wage development is still above the inflation rate and is a significant cost driver for companies. Rising wages are becoming a double-edged sword for employees. Although they earn more, employment fell slightly for the third month in a row.

Datev middle class index: wages

The increase in unemployment predicted by labor market experts appears to have already begun, at least among smaller companies. There are currently 2.77 million people unemployed in Germany. Next year, the three million unemployed mark could fall. The hoped-for economic recovery at the end of the year has so far failed to materialize. In December, the Ifo business climate index fell to its lowest level since May 2020, primarily because the companies surveyed were even more pessimistic about the new year.

Datev SME Index: Employment

The increasing number of bankruptcies shows how thin the air is for many companies these days. For 2024, the Creditreform credit rating agency expects 22,400 corporate bankruptcies, a quarter more than last year. More on the topic Here, too, it became apparent that the majority of bankruptcies this year will be in small companies. Eight out of ten of the companies affected employed a maximum of ten people. The prospects for the coming year are no better. “The wave of insolvencies will continue in 2025,” said Creditreform managing director Bernd Bütow.
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