08/26/2021 | Press release | Distributed by Public on 08/26/2021 02:19
The coronavirus pandemic has left visible traces in many of the 3.8 million small and medium-sized enterprises in Germany. However, the crisis has not affected all SMEs equally, and its effects are more prominent in certain segments. KfW Research has explored crisis impact and crisis resilience patterns in a new study. According to the analysis, small businesses are more heavily impacted by the crisis than medium-sized SMEs, for example. Furthermore, the crisis is more likely to have hit companies that already had a low credit rating before the outbreak of the coronavirus pandemic, businesses with foreign operations and sectors that were not able to shield themselves from the impact through special economic stimulus measures.
KfW Research used turnover losses and the development of the equity ratio during the coronavirus crisis as key indicators of the impact of the crisis on a company or of its resilience. The latter is a reflection of turnover losses that could not be offset but led to a depletion in the company's equity base or forced it to borrow money to secure liquidity. A deterioration in a company's equity ratio has negative consequences beyond the current crisis phase, for example by reducing its potential for obtaining finance.
In May 2021, 39% of SMEs were still struggling with losses in turnover. At the beginning of the crisis in April 2020, that share was 66%. In May 2021 approx. one fourth (24%) of Germany's SMEs reported a deterioration in their equity ratio in the course of the coronavirus pandemic.
A closer look reveals the following patterns:
'Although every crisis is different, some of our insights from the current coronavirus crisis can be applied to other crises. One of them is that small businesses are more vulnerable. Because of their smaller size, they generally have fewer options for building up sufficient reserves to overcome crises', said Dr Fritzi Köhler-Geib, Chief Economist of KfW. Economic policy approaches can be derived from the finding that certain business segments are hit harder by crisis situations than other business groups owing to structural and immanent disadvantages. 'Many of these enterprises play an important role in the economic process. They occupy market niches, take on the role of efficient suppliers of large enterprises and thus operate profitably when there is no crisis. Losing such enterprises to a crisis would damage the economy', said Fritzi Köhler-Geib. 'Economic support measures as an immediate crisis management tool should therefore be expressly regarded as necessary. The fact that digital and innovative SMEs got through the pandemic more successfully provides a tailwind for economic policy to set the right course now and provide greater incentives for future investment in digitalisation and innovation as well as climate action. One important element is to provide a consistent framework, such as a reliable and predictable, rising CO2 price signal for climate action and environmental protection. Others include financial incentives such as loans coupled with subsidies in order to provide all enterprises with greater incentives to invest in climate action, innovation and new technologies. In order to come out of the crisis stronger we will also need economic policy measures aimed at enhancing crisis resilience, making even better use of our international integration and strengthening the European Union.'
KfW Research has written a position paper with proposals setting out how this can be achieved. Along with the current analysis on crisis impact and resilience, it can be retrieved at: