Many German companies fear looming insolvency under COVID-19 restrictions

Source: Xinhua | 2020-04-30

Almost 30 percent of German companies could only survive for three months or less if the pandemic-related restrictions were to remain in place for a longer period, according to a company survey by ifo Institute published on Wednesday.

Around one in two German companies could still hold out for more than six months under the current restrictions. "These are worrying figures that point to a coming wave of bankruptcies," said Klaus Wohlrabe, head of surveys at ifo.

"Particularly critical" was the situation in the German retail sector in April, according to ifo. 44.9 percent of retail companies feared that they could only survive for a maximum of three months while 18.3 percent said they could survive for three to six months. Only 36.8 percent of German retailers would be able to survive for longer under the current COVID-19 restrictions.

In March, the German government and the federal states had agreed to introduce restrictions on public life in order to slow the spread of the coronavirus. With some exceptions such as supermarkets, pharmacies and petrol stations, the retail sector in Germany had been closed until last week.

Among German service providers, 31.3 percent said that they would only have three months or less until they would go bankrupt. Still, 44 percent of service providers in Germany would survive for more than six months even if measures were maintained, according to ifo.

The situation was somewhat more stable in Germany's important manufacturing industry, where 24.8 percent of companies would be threatened by insolvency within three months. According to the survey, more than every second manufacturing company in Germany still had the strength to continue operations for more than six months.

According to ifo, the construction industry in Germany was currently "in the best shape." Only 20.4 percent of construction companies was threatened by immediate insolvency while 54.6 percent said that they could survive more than half a year.