Energy crisis: Quarter of German companies 'plan to cut jobs'

Rachel Stern
Rachel Stern - [email protected] • 24 Oct, 2022 Updated Mon 24 Oct 2022 10:09 CEST
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A German worker installs LED lights to keep energy costs down. Photo: picture alliance/dpa/kfzteile24 | Josephine Logisch

In order to tackle rising energy prices, a quarter of German companies revealed in a new survey that they planned to cut jobs, among other cost saving measures.

Around 25 percent of German companies plan to axe jobs as a cost saving measure, according to a survey of 1,080 German firms led by the Munich-based Stiftung Familienunternehmen released on Monday. 

The figure stood at 14 percent in their last survey conducted in April.

Furthermore, ninety percent of the mostly small or medium-sized companies surveyed either plan to raise their prices or already have.

The results raise an alarm signal, said Rainer Kirchdörfer, Chairman of the Stiftung Familienunternehmen. 

“Companies are scaling back manufacturing in Germany or relocating production to places where energy costs, taxes and bureaucratic burdens are lower," he said.

Around nine percent of companies are seriously considering moving their production abroad, as opposed to only six percent six months ago, according to the survey.

Additional cost-cutting

A further 82 percent planned to invest in "energy efficiency" in light of rising natural gas costs, which Germany has seen double since 2021. 

Many of the firms expressed support for increasing the use of nuclear power, which Germany has slowly been phasing out.

READ ALSO: Germany to keep nuclear energy until at least April 2023

As an additional measure, 13 percent of companies - around one in eight - are considering production stops, compared with six percent in April.

In 2022, energy costs accounted for an average of 8.2 percent of total sales. In 2021, the figure stood at just 5.1 percent.

According to another recent survey from the Institute for Economic Reseaerch (Ifo), only just under one in three German companies has an emergency plan in place to cope with the energy crisis.

Smaller companies in particular lacked planning. "The smaller the company, the less frequently measures were initiated," said Ifo researcher Johanna Garnitz.

"For companies with more than 500 employees, 60 percent have taken appropriate precautions."

For companies with up to 50 employees, the figure was down to 15 percent, she said.

The most frequently cited measure to save energy and cushion increased costs was lowering building temperatures, according to the Ifo. In addition, companies called for a reduction in overtime and holidays, more home office and Kurzarbeit, or short-time work.

Is a recession approaching?

The German economy, whose energy-hungry industries relied heavily on Russian gas before the war, is forecast to shrink by 0.4 percent in 2023, according to figures released by the S&P Global Market Intelligence report on Monday.

Both manufacturing and services in Germany were showing accelerated rates of shrinkage, which could prompt companies to shelve jobs, the survey showed.

German businesses were "deeply pessimistic" about the year ahead, stated the report, as soaring energy costs impact Europe as a whole.

Man with shopping bags in germany

A man walks through Hannover city centre with shopping backs. Businesses in Germany are pessimistic about the economic outlook. Photo: picture alliance/dpa | Julian Stratenschulte

A eurozone-wide recession "is looking increasingly inevitable," S&P Global Market Intelligence chief business economist Chris Williamson said.

"The region's energy crisis remains a major concern and a drag on activity, especially in energy intensive sectors."

READ ALSO: Fact check: Is Germany heading into a recession next year?

Aid for businesses and households

Since 2021, gas prices have more than doubled, with the most dramatic rises occurring since Russia's war in Ukraine began on February 24th. 

To dampen the impact of these soaring costs, Germany’s Gas Price Commission has recommended that government implement a phased model of support - both for businesses and individual households. 

This foresees the government stepping in to pay people’s gas bills in December and then freezing gas prices up to a certain allowance for private households, small-and-medium sized businesses and industry from March 2023. 

A summit last week agreed on a number of measures, but a key one, of capping wholesale gas prices, was kicked into future deliberations by Germany, which fears gas supplies being diverted to more lucrative markets in Asia.

In September, Germany unholstered a massive 200-billion-euro plan to shield German consumers from high energy prices, triggering unease among EU partners at its go-it-alone approach that risks distorting the single market.

READ ALSO:

German Chancellor Olaf Scholz reluctantly agreed to have the bloc look further at the price cap measure but only after an impact analysis.

With reporting from AFP.

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Rachel Stern 2022/10/24 10:09

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