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The business climate index for SMEs in Saxony has fallen to minus 13.7 points - the lowest level in over a year. Companies are more pessimistic about the future than they were during the coronavirus crisis. This result of the latest survey by the credit agency Creditreform is not really surprising, after the employers' association of the Saxon metal and electrical industry had already announced a sharp drop in sales and incoming orders for the most important industrial sector in Saxony last week. It is no exaggeration to speak of a depressive mood, emphasized Andreas Aumüller, Managing Director of Creditreform Dresden, at the presentation of the survey results on Tuesday.
The reasons: a lack of orders and therefore less turnover, but rising costs. Almost every second medium-sized company (42%) in Saxony reports falling revenues, and every third company is expecting a further decline in orders. One in four companies has already reduced its workforce and one in six intends to do so in the coming months. The majority of companies (63%) are not investing for the third year in a row.
Catch-up effects from the pandemic period
The risk of default when repaying loans and settling invoices is increasing, and the number of company insolvencies is on the rise again. In Saxony, there were a total of 822 company bankruptcies last year, 27 percent more than in the previous year. However, compared to other regions in Germany, these are still "manageable figures", according to the report. The good liquidity situation in the Free State would ensure that the Saxon economy could still come through the current wave of insolvencies comparatively well.
Companies in Saxony have the highest equity ratio compared to other German states, but capital is now being used up, especially in smaller companies. The increase in insolvencies also reflects catch-up effects, as state aid during the coronavirus pandemic saved companies from insolvency that did not have a viable business model at the time.
Businesses in the hospitality industry and in the business-related services and transportation/warehousing sectors are particularly affected. If fewer goods are produced, less transportation would be needed, it was explained. However, the Free State is also experiencing a "silent" industrial decline. This refers to the difference between business registrations and deregistrations. Last year, the number of business registrations increased by a meagre 1.1 percent, or 282 registrations in absolute figures, while in the same year, deregistrations rose by 4.7 percent, or 1,127 deregistrations, more and more frequently because no company successor can be found. One of the new state government's concerns should be to strengthen entrepreneurship and provide more support for start-ups.
"Just let the entrepreneurs do it"
Dissatisfaction with the German government's economic policy is steadily increasing, with 79% rating it negatively and only 2% positively. Reducing bureaucracy, labor shortages and energy costs are the three most important issues where companies feel progress is lacking.
What can be done? "Politicians cannot solve the problems, but they must improve the framework conditions," said Aumüller. The Creditreform Dresden boss includes simplified approval processes, more sense of proportion when it comes to data protection, faster integration of refugees into work, not wanting to implement every EU regulation 150 percent of the time and better depreciation rules for investments. "Just let the entrepreneurs do it," says Aumüller.
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