Coronavirus: Germany faces 1 million job losses in SME sector

A survey by Germany’s KfW development bank says that more than a million jobs are under threat in the country’s small and medium-sized companies this year because of the COVID-19 pandemic.

Germany’s SMEs, known as the “Mittelstand” are the backbone of the economy. Their share of overall economic activity is 71.3%, according to KfW. These companies are now facing the brunt of the economic fallout.

The slump in economic output and the uncertainty about how the remainder of the pandemic is going to play out is stifling expectations for 2020 among SMEs. The survey said that about 2 million companies are expecting falling sales for the rest of the year.

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The decline in sales will likely lead to job losses, according to the survey: SMEs said job losses could amount to up to 3.3% by the end of the year, meaning a total of 1.1 million jobs would be lost by the end of the year.

On the upside, the liquidity situation of Germany’s SMEs has eased since the peak of the pandemic in April. About every third medium-sized company said they had sufficient liquidity reserves (12 percentage points more than at the beginning of April) to last for six to 12 months.

However, a third of SMEs are expecting equity ratios to decline in the current financial year, the KfW said. "Overall, however, medium-sized companies in Germany have a high level of financial resilience," Köhler-Geib said.

“Despite the comfortable starting position of most medium-sized companies in Germany, the corona crisis will leave its mark,” he said. "Caution and restraint could determine the actions of many in the coming period."

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