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KfW Research

KfW SME Panel

Edition 2022

SMEs have largely digested the pandemic but the war in Ukraine and the energy crisis are clouding the business outlook

SMEs barely have time to catch their breath after the coronavirus pandemic. The Ukraine war and the energy crisis are now causing them trouble. Energy prices are the number one uncertainty and their effects have yet to filter through in full. Business sentiment has deteriorated significantly. Already there are signs that companies are reluctant to invest, pressure on equity ratios is mounting and credit access is becoming more difficult in 2022. SMEs at least entered the current crisis on a solid foundation. In 2021 they largely recovered the deep losses they suffered in the first year of the crisis. Turnover, employment and profitability increased and equity ratios also recovered noticeably in the past year. These are the findings of the KfW SME Panel 2022, which paints a comprehensive picture of the present situation in autumn of 2022 and of the development of small and medium-sized enterprises during the past year.

Comments from KfW's Chief Economist

Dr. Friederike Köhler-Geib

“The current economic environment is extremely challenging as a result of multiple simultaneous shocks. In dealing with the enormous uncertainty about the further course and accompanying effects of Russia’s war of aggression against Ukraine and the resulting energy crisis, however, SMEs are generally on a strong footing. Our surveys show that a slim majority of SMEs currently expect to be able to manage the currently high energy prices in the long term as well. But the full effects of the prices are yet to flow through, and for some businesses the financial pressure is already too much to bear. This is coupled by worries over a renewed COVID autumn, generally muted growth prospects, persistently high inflation, rising interest rates and ongoing supply bottlenecks. After a very good year 2021, the current year is marked by shattered investment plans, growing pressure on equity ratios and more difficulties in accessing credit.

The pressure is particularly high for energy-intensive manufacturing SMEs. They are feeling the effects of price increases much more strongly. That means the current developments specifically affect a subsegment of SMEs whose importance for employment, turnover and investment across the overall economy is significantly higher than their mere share in the number of enterprises. Should a large number of these enterprises in particular run into financial distress, the consequences would therefore be disproportionately high. It will be necessary to ease the burden on businesses that are particularly affected by high energy prices in order to stabilise the economy, but combined with incentives that support the transformation to net zero.”