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Press Release from 2020-10-22 / Group

KfW SME Panel 2020: Enterprises expect business to drop by a historically low rate as a result of the crisis

  • SMEs expect a 12% drop in turnovers from the year 2019
  • Employment in the SME sector might fall 3.3% by the end of the year
  • Investment activity subdued despite improved liquidity position
  • Still, SMEs are highly resilient thanks to good performance in previous years

The coronavirus pandemic has left a deep mark on small and medium-sized enterprises (SMEs) in Germany, as companies experience lasting effects and uncertainty. Declines in turnover have been steeper than in the financial crisis. As a result, many companies fear further pressure on employment. The crisis is also weighing on businesses’ equity ratios. However, thanks to their successes in previous years, SMEs broadly rest on a solid foundation. These are the findings of the new KfW SME Panel 2020.

The historic collapse in economic output and uncertainty surrounding the further progression of the crisis characterise SMEs’ expectations for 2020 as a whole. More than one in two SMEs – around 2 million companies – anticipate lower turnovers in the current year. The expected declines add up to around 12% of last year’s turnovers, or roughly EUR 545 billion. The high losses in turnover are also likely to put further pressure on employment. Based on the expectations reported by SMEs, job losses in the SME sector could be as high as 3.3% by the end of the year, amounting to a loss of almost 1.1 million jobs over the year as a whole. Before the crisis broke out, however, SMEs posted strong employment gains. At the end of 2019, employment in SMEs reached a new record high 32.3 million workers. Most recently, the share of the SME sector in aggregate employment was 71.3%.

Representative separate surveys conducted as part of the KfW SME Panel, however, also showed that SMEs’ liquidity situation has eased significantly since the low point of the crisis in April. In the case of a renewed lockdown, roughly one in three SMEs would today be equipped with sufficient liquidity reserves – 12 percentage points more than at the beginning of April. A further 28% would have liquidity reserves for another 6 to 12 months.

But the expected losses in the year 2020 are depleting companies’ financial resources. A good one third of SMEs therefore expect equity ratios to decline in the course of this business year. “SMEs in Germany, however, generally have strong financial resilience”, said Dr Fritzi Köhler-Geib, Chief Economist of KfW. “In the past years, companies have built high levels of equity, which now benefits them. The average equity ratio even reached a new record high of 31.8% in 2019.” Last year’s renewed turnover growth and increased profitability contributed to this. Boosted by strong domestic demand, SMEs recorded turnover growth of 3.5% in 2019. At the same time, the average return on sales climbed to 7.5%.

The coronavirus crisis is also affecting SMEs’ investment behaviour. Up to September, much fewer investment projects were implemented as planned than in previous years. Many companies appear to be putting off their investment projects for this year because of high uncertainty and a shortage of funds. The investment volume in the SME sector is thus likely to be significantly reduced in 2020. That would stop the upward trend in SME investment activity of the past six years in its tracks for the time being. In 2019 the volume of new investment still reached a new record high of EUR 187 billion.

The coronavirus crisis could turn out to be an obstacle for investment and innovation in the medium term as well. “Despite the comfortable starting position of most small and medium-sized enterprises in Germany, the coronavirus crisis will leave an imprint – not just on SMEs’ balance sheets but also in the minds of entrepreneurs. The actions of many might be guided by caution and restraint in the period ahead”, said Dr Fritzi Köhler-Geib. “It is important to respond to this with targeted economic-policy measures that reduce uncertainty while creating incentives to seize the opportunities presented by the crisis.”

The KfW SME Panel 2020 is available for download here.


Portrait Wolfram Schweickhardt


Wolfram Schweickhardt


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