The significantly higher interest rates are slowing down investments in German SMEs. Only around a fifth of companies are happy about the turnaround in interest rates, according to a survey conducted by DZ Bank among over 1,000 owners and managers of medium-sized companies in Germany.
More than half of those surveyed now see the higher interest rates as bad for their own company (53 percent) and hope that interest rates will fall again (55 percent). According to the survey, more than a quarter of SMEs are planning to scale back investments because of the increased borrowing costs.
After years of cheap money, the European Central Bank (ECB) launched a series of rate hikes in July. The central bank wants to get the high inflation under control.
“This could actually threaten a price-wage spiral”
In the DZ Bank survey, four out of five medium-sized companies assume that wages in their company will rise as a result of persistently high inflation. “If this expectation comes true, the companies should try to pass on the increased labor costs to their customers,” the economists at DZ Bank analyse. “This could actually threaten a price-wage spiral, which would mean that companies and consumers would be confronted with increased inflation rates for even longer.”
Rising energy and food prices in particular have been fueling inflation for months. The federal government is trying to make natural gas, electricity and district heating more affordable by applying price brakes retroactive to January 1st.
“Cost burden in medium-sized companies remains high”
A quarter of the medium-sized companies surveyed stated that they would be relieved by the electricity and gas price brakes. In the chemical industry it is even more than a third of those surveyed. At the same time, however, almost 40 percent of the companies surveyed consider the price brakes in their current form to be insufficient.
“The cost burden in medium-sized companies remains high despite the fall in electricity and gas prices and the price brakes,” concludes DZ Bank. Although the economic situation has recently eased somewhat, “the majority of medium-sized companies are still under financial pressure”.
Uwe Berghaus, board member for corporate customers at the cooperative DZ Bank, nevertheless expressed his confidence that most companies will also master this phase well: “Because the German medium-sized companies are fundamentally healthy and financially sound.”
