Mid-sized firms plan to invest – with own cash

Mid-sized firms plan to invest - with own cash
Photo: DPA
Some 85 percent of medium-sized German companies are planning to invest this year, but relatively few will run to the bank to borrow money, a study released on Thursday by the Deutsche Bank showed.

The survey of 200 financial decision-makers in companies with sales of more than €25 million was conducted by TNS Infratest in April and May and obtained by the Handelsblatt newspaper.

The size of the planned investments is astounding, the paper wrote. Some 41 percent plan to put in between €500,000 and €2.5 million, while 16 percent plan to spend between €2.5 million and €5 million, with nearly an equal percentage planning to invest less than €500,000.

And perhaps equally noteworthy is how the company’s plan to finance their investment.

Nearly 75 percent expect to use money they already have, with only a quarter going to the bank for new credit.

For those following the heated discussion about the euro this should come as no surprise. Chancellor Angela Merkel has been urging her European colleagues to get their financial houses in order and not spend more than they produce. This survey would suggest that Germany’s medium-sized companies operate in much the same way as its chancellor.

The companies surveyed said their planned investment spree was aided by low interest rates, a positive investment climate and the need to make up for reduced investment some years ago when things were even tougher economically. Also some 62 percent said government subsidies for energy efficiency projects were behind their decision.

But despite the positive climate another survey published on Thursday showed a slight increase in the number of firms going bankrupt. Some 32,000 firms are expected to go under during 2012 – an increase of about 2,000 over last year.

And due to the bankruptcy of Schlecker, once Germany’s largest drugstore chain and the ongoing difficulties in the solar industry, the financial damage from bankruptcy rose by 55 percent in the first half of this year to reach €16.2 billion, with the number of endangered jobs up 40,000 to 150,000.

Those workers are unlikely to be helped by the increase in medium-sized firms’ investment, as most firms said they were not planning to increase the number of jobs. Some 27 percent are and two-thirds said their investments were being made to maintain the employment they had.

Some two-thirds planned to buy new machines or invest in their infrastructure and more than a fourth said they wanted to invest in real estate. A tenth said they were planning to buy another business.

DAPD/The Local/mw

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