German craftsmanship has rotten soil

It was only a short interim high - in 2022 after the corona pandemic, the economy in Germany got going again. But with the outbreak of war in Ukraine, all hopes of a lasting recovery had to be buried.

The craft industry is an example of this development: as early as 2023, companies' operating values were declining. This negative development has now accelerated. In some areas, figures were given that were still below the figures in the first year of the crisis, 2021.


Mood in the basement


The individual operational key figures can be summarized in the answers to the general mood in the trades. The majority of the representative respondents (55.3 percent) stated that their business situation was very good to good. But the proportion with extremely negative reviews has also doubled. 7.0 percent of the companies spoke of a poor or unsatisfactory business situation. The balance of good and bad reviews results in a value of plus 48.3 points, which is around 14 points below the figures from 2023 and at a low point in the last ten years. For comparison: Before the crisis in 2018 to the beginning of 2020, the value was never below 75 points.


The cause of the bad mood is obvious. Only 28.1 percent of companies reported increased sales in the last six months - in the previous year it was just under 38 percent. This results in a balance with a wafer-thin increase of 0.6 points because 27.5 percent of those surveyed also had to accept falling sales. The construction industry suffered the most from declines in sales, with one in three companies reporting declining sales. However, the sales development in the automotive trade was positive - here 15 percent spoke of declining sales, but at least almost 40 percent spoke of increases in sales. When it comes to sales, it should be noted that two thirds of the companies spoke of increased offer prices. In real terms, sales – if they have increased at all – are even weaker.


Where should the staff come from?


In view of the crisis, politicians like to point to the stability of the labor market. In the craft sector, however, the balance of new hires and reductions in the workforce suggests that this situation will soon change. 19.6 percent of companies stated that they had increased their workforce. However, this compares to 23.5 percent who had to make do with fewer employees. These figures should be seen against the background of an acute shortage of skilled workers. Even companies that are willing to hire will have difficulty recruiting new employees given the problems. The balance of new hires and layoffs has slipped below zero for the first time in over ten years.


The current situation is “grey on grey” for craft businesses. But it doesn’t get any brighter when we look into the future. Only a quarter of the companies surveyed by Creditreform Economic Research hope for increasing sales - in 2023 it was still a third. Compared to the previous year, the proportion of those who expect a (further) flattening of the sales curve has also increased. More than 27 percent see sales falling in the future - that's more than 10 percentage points more than in 2023. Here, too, there is a negative value on balance for the first time. The greatest fears are shown by the construction industry and the finishing trades, each with a share of over 30 percent and falling sales expectations. The situation is more hopeful for personal services, which are likely to see an increase in consumption and almost 40 percent have positive sales expectations. What profit remains from the sales? Here too, the balance of hope and fear is deep red. Only 18.1 percent see an increase in earnings in the next six months, but 32.7 percent fear falling profits. This results in a balance of minus 14.6 points – the worst value since 2009.


No trainees, no skilled workers or employees are retiring


In terms of length of service, the trade has always been a source of stability. Even now, at least two thirds of companies want to keep their workforce unchanged in the next few months. However, the poor order situation and the demographic factor that is leading to retirement for many employees cast future personnel development in a dim light. Only 20.6 percent of companies spoke about increasing their workforce (previous year: 25.2 percent) and almost 13 percent fear that they will have to make do with fewer employees in the future.


Like a flashpoint, the full extent of the investment misery becomes clear. Complicated by the difficulties in financing due to increased interest rates, but also by a lack of confidence in an economic improvement, only 41.5 percent of the companies surveyed see themselves motivated to invest. Between 2014 and 2020, more than half of those surveyed said they wanted to make investments. If investments are planned, then primarily replacement investments (61.1 percent). Expansion investments have been pushed back and are only on the agenda for 44.7 percent of craft businesses.


In the wake of the recession, the craft sector is also affected. The most important variables for assessing the economy – sales, personnel development and investments – have deteriorated significantly. Crafts are an important economic factor, relief and help are necessary. This is all the more so because the economic crisis is also accompanied by structural problems, ranging from digitalization and environmental protection requirements to the shortage of skilled workers.



Source: Creditreform  

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