According to the latest survey by the Ifo Institute, as many as 8.1 percent of all enterprises in Germany perceive their economic existence as under threat. Every twelfth enterprise stands on the brink of collapse and fears that the current economic conditions may lead to a complete cessation of activity. This is a symptom of a structural tension in Germany that permeates entire sectors of the economy, from trade through industry to services. Ifo experts emphasise that the situation remains highly tense, and that a rising number of bankruptcies in the coming months may further weaken the confidence of investors and consumers.
The situation is worst in retail trade, where the share of firms fearing for their survival has reached a record level of 17.4 percent. Retailers are plagued by persistent consumer restraint. Added to this is the growing pressure from online commerce and cheap suppliers from abroad, who undercut margins and push traditional shops out of the market. Trade as a whole, both retail and wholesale, registers 11.6 percent of firms in a critical situation, which shows how the crisis is spilling across the entire distribution chain. When consumers tighten their belts, this effect is not confined to the shops; it strikes suppliers, warehouse workers and the entire logistics network, creating a domino effect in which the weakness of one link destabilises the next.
The situation is even more acute in the services sector, particularly in the hotel and catering industry, where almost every fifth enterprise, nearly 20 percent, sees its future in dark colours. Restaurants, hotels and guesthouses, which until recently benefited from the return of tourism after the pandemic, are now grappling with weak domestic-market demand and rising fixed costs.
In industry, the share of enterprises whose existence is under threat fell slightly to 7.5 percent, which might suggest a certain stabilisation. However, this slight decline only masks deeper structural problems. High energy and raw-material costs continue to weigh on this export-oriented branch of the economy, which is losing competitiveness against cheaper producers from Asia. Industrial enterprises, once the locomotive of the German economy, must now cope not only with more expensive energy, but also with the long-term consequences of the global restructuring of supply chains.
In construction, in turn, this share rose slightly to 7.3 percent, which reflects the collapse of the housing market. Lengthy administrative procedures, the reluctance of banks to finance new projects and the lack of demand for housing mean that developers and construction firms are increasingly confronted with the spectre of a lack of orders.
Enterprises report rising operating and energy costs, which eat into their profit margins, as well as an increasingly burdensome bureaucracy that consumes the time and resources needed for real activity. Added to this is the problem of financial liquidity: when customers economise or themselves run into trouble, suppliers and service providers are left with unsold invoices and empty accounts. Klaus Wohlrabe, head of survey research at Ifo, aptly sums up this mechanism: "The crisis is transmitted along the supply chains. When customers drop out or cancel orders, this hits suppliers and service providers with full force." His comment underlines that the tense economic situation is not an isolated phenomenon, but a systemic one. When every twelfth enterprise is considering closing down its operations, the effect of course touches nationwide employment, investment and GDP growth. Firms that are fighting for survival cut back investment in innovation, modernisation and staff development, which weakens the long-term competitiveness of Germany as a whole. Particularly worrying is that the crisis is not confined to cyclical sectors sensitive to the economic situation, but also encompasses those that should be resilient, such as advanced services or high-tech industry. This suggests that Germany is grappling not only with temporary difficulties following a series of external shocks, but with deeper structural problems: high energy costs after the energy transition, excessive regulation and the loss of a competitive advantage on global markets.
