Stable economic situation in SMEs – stagnation on the horizon

The cooperating SME sector has started 2023 more robustly than feared. The majority of companies assess the current economic situation as rather positive, and there are also signs of a stabilization in investments and employment for the current year. This is the result of the current economic survey of the Mittelstandsverbund among its members.
The new year got off to a relatively stable start economically for cooperating SMEs – 45.6 percent of cooperatives describe their economic situation as good, although this is a drop from the final quarter of 2022, when more than 57 percent of companies still reported such an assessment.

“Even if the current situation is clearly positive compared to the scenario that emerged at the beginning of the winter for the retail groups, the highest level of vigilance is still required. The current slight drop in energy prices should not obscure the fact that inflation remains historically high, bureaucracy is rampant, the digital and transport infrastructure is too weak, and there is an international one-sided dependence on suppliers. Political decision-makers who want to see robust SMEs must take decisive countermeasures here,” says Dr. Ludwig Veltmann, Managing Director of the Mittelstandverband, referring to the results of the economic survey.

A similar picture emerges for the sales figures of the collaborations: Only just over 40 percent of companies reported increases in sales between January and March 2023 – a drop of around 8 percentage points compared with the previous quarter. At the same time, there was a slight increase in the number of companies whose sales declined in the first quarter, to around 30% (previous quarter: 28.6%). The majority of the cooperative groups see the forecast for the coming months as stable (around 44%) – however, around 23% of the companies expect sales to fall (previous quarter: 19.6%). More than a quarter of the cooperations are optimistic about the future and expect sales to rise over the rest of the year.

A similar trend can be observed at the affiliated stores of the integrated retail groups: Here, sales were stable for the majority of companies between January and March (around 40%). Sales were up for around a quarter of the companies, but more than 28 percent recorded a downward trend in the first quarter of 2023.

The earnings situation looks better: For around 44 percent of alliances, i.e. the majority, this is at a stable level (previous quarter: 50%), while around 25 percent of companies are even reporting an increase (previous quarter: 30.4%). However, 30 percent of the collaborations also report a drop in earnings in the first three months of the year (previous quarter: 19.6 %). Looking ahead, more than 54 percent of the alliance groups do not expect any significant change in earnings performance in the coming months. Around 18 percent of the companies expect an increase, but around 25 percent anticipate a decrease.

A continuity in the investment behavior of cooperating SMEs can be observed in the first quarter: More than 70 percent of the cooperations invested the same amount in the first three months as in the final quarter of 2022 (previous quarter: 62.5 %). More than 12 percent of the companies even made more investments (previous quarter: 25 %), while the level of investment from January to March was lower at 14 percent of the associations (previous quarter: 8.9 %). At the same time, the majority of the alliance groups are optimistic about the future – around 60 percent of the companies intend to invest just as much in the near future, and 28 percent are even planning to increase their investments.

Employment figures were stable at the beginning of the year. The employment level has not changed in more than 77 percent of the cooperations (previous quarter: 67.9 %), while around 18 percent of the companies have hired more staff (previous quarter: 23.2 %). Only 3.5 percent of the associations hired fewer staff (previous quarter: 8.9 %).

The outlook reveals that around 32 percent of the alliance groups are planning to increase staffing levels in the coming months – while around 60 percent intend to remain at the same employment level.

A look at the affiliated companies shows parallels – here, too, more than 70 percent of the companies reported an unchanged number of employees, while around 11 percent hired more staff.

Even if the cooperating SMEs remain resilient, a wide range of challenges such as significantly increased energy costs, persistently high inflation, the aftermath of the pandemic and supply bottlenecks are putting massive pressure on them. So how have the past few months affected companies’ exposure to insolvency? The current economic survey by the Mittelstandsverbund also provides answers to this: around one third of the alliance groups believe that the risk of insolvency among their affiliated companies – i.e. their members – has increased moderately or even significantly in the recent past. Slightly more than half of the collaborations tend not to assume this.

There are also currently only isolated fears of the cooperatives themselves being jeopardized by insolvencies or members voluntarily going out of business. Most companies expect less than 1 percent of connecting stores to be affected by insolvencies or voluntary business closures for economic reasons in 2023.

Fifty-seven central cooperative network companies with around 43,000 affiliated companies from a total of 18 sectors took part in the survey, including kitchens & furniture, consumer electronics, shoes & textiles, the building trade, and food & beverages. The survey is conducted regularly among the association groups of the Mittelstandsverbund, which represent a total of 230,000 medium-sized companies. The purchasing, marketing and service cooperatives surveyed include, for example, Edeka, Rewe, Sport 2000, expert, Mega and Bäko.