1. GA-English
  2. News

Bonn: Economy crashes historucally due to corona crisis

Effects of the Corona Pandemic : Economy in the region crashes historically

The latest economic survey by the Bonn/Rhein-Sieg Chamber of Industry and Commerce shows historically poor results. The majority of the companies expect massive losses in turnover, many insolvencies are threatening.

After many years of upswing and mostly good business development, the coronavirus is massively slowing down the regional economy. In its surveys of companies in the region, the Bonn/Rhine-Sieg Chamber of Industry and Commerce has never recorded worse values for mood and location.

"We are in the midst of the worst economic crisis since the Second World War," said IHK President Stefan Hagen on Wednesday when presenting the results. At 67 points, the economic climate indicator falls to its lowest value ever measured - after 112 points at the beginning of 2020 and the all-time high of 132 points at the beginning of 2018. A value of 100 points means that optimistic and pessimistic assessments are balanced.

Every second company from Bonn and the Rhein-Sieg district describes the current business situation as bad. This contrasts with only 15 percent with a continuing good situation. Up to the beginning of the year, around 40 percent were always satisfied with their situation. 84 percent of the companies surveyed feel that the corona crisis is having a negative impact on their business. "The hospitality and transport sectors have been particularly hard hit," said IHK managing director Hubertus Hille.

Significantly lower demand

Two-thirds of the companies register a lower demand for their products and services. 30 percent report liquidity bottlenecks and more than one in five companies even have to cope with a standstill in business activity.

Every second company expects business to deteriorate further in the next twelve months, while only 18 percent expect an improvement. Hille: "The outlook is very bleak, especially in the hospitality, logistics and retail sectors - despite the easing measures adopted by the NRW state government".

Hagen demanded that the federal government should promote investment in economic stimulus programs. If, for example, the urgently needed digitalisation of schools is promoted, this will bring orders for companies. If consumers were directly provided with funds, the effect would fizzle out.The IHK president fears massive consequences for the finances of the municipalities due to trade tax losses. This year and next year many companies will not make any profits. The municipality of Grafschaft an der Ahr, for example, a strong business location, has already announced that it is particularly affected by the loss of trade tax and is therefore on the verge of insolvency.

Big losses in turnoverOther municipalities in the region will do likewise: In terms of expected sales for 2020, 15 percent of the companies see a slump of 50 percent or more. 22 percent expect a decline of between 25 and 50 percent, and another 27 percent expect a reduction in sales of between 10 and 25 percent. This contrasts with only four percent currently expecting an increase in sales.

"If business does not improve again in the short to medium term, this will inevitably lead to insolvency for many companies," said IHK managing director Hubertus Hille. In the next four weeks, 78 percent still consider insolvency to be impossible or unlikely under the current conditions.

For four percent, rapid insolvency would be certain or very likely. If the situation does not improve in the next three months, this figure will already rise to 14 percent.

At the time of the survey, which ran until the beginning of May, the hospitality industry was particularly hard hit by the restrictions imposed by the corona crisis and there was also a lack of perspective, Hille explained.

Most establishments had to close down completely or were only able to generate a fraction of the usual turnover through take-away and delivery offers. At 12.4 points, the business climate index achieved the historically lowest value of all the industries considered. 96 percent assess their business situation as poor.

Exports from the region will shrink considerablyOverall, the IHK employment indicator shows a clear downward trend. 38 percent of the companies surveyed are currently planning to reduce their workforce, while only six percent intend to increase their employment levels.

The spread of the coronavirus and the associated disruption of many logistics chains will also cause exports from the region to shrink sharply. Two thirds of the exporting companies expect exports to decline. And this is important for the economic situation in the region: "We still have a veritable industry here," said Hagen.

In order to help the economy through the crisis, politicians have decided on numerous measures. So far, almost half of the companies have taken advantage of one or more of the aid measures. 72 percent of the companies that have accepted help have applied for short-time work benefits.

67 percent have applied for emergency aid in the form of a grant. Almost 40 percent have taken advantage of the opportunity and agreed to tax deferrals or reductions in advance payments.Hille and Hagen expressed fundamental satisfaction with the crisis management of the federal and state governments. Now, they said, it was time to take further measures to reduce uncertainty.

Original text: Claudia Mahnke

Translation: Mareike Graepel