Page 15 - FDI Alliance International Magazine Summer 2020 Digital Interactive Issue

of under €50m or balance sheet of under €43m according to EU definitions.
They employ more than 60 per cent of the work force, accounting for
more than half of economic output and training more than 80 per cent of
Germany’s apprentices.

Naturally, during an economic shock such as the one the world has
ARTICLE
experienced, smaller companies are the first to suffer. But Germany has long
since learned to value and protect its Mittelstand (as SMEs are collectively
known) for the advantages they create in the long term: diversity, flexibility
and innovation. Global market leadership in many small but lucrative
niches (think velvet theatre curtains, toothbrush bristles or airport-specific
buses) is a feature of the German businesses landscape, as is the ability of
larger companies to turn to smaller ones for specific solutions or aspects of
research.
GERMANY KEEPS ITS COOL THROUGH CORONA The tailored government funding to deal with the pandemic was thus in
many respects an extension of the wide array of instruments SMEs can rely
upon in Germany. Grants for SMEs coming to Germany can be worth
up to 40% of eligible costs of the investment. Loan interest rates from the
KfW start at 1.0%, while in some cases loan payments can be principal-
free for up to seven years. Government funds complement and co-invest
with venture capital. R&D assistance covers the entire spectrum of industries
and is generally reserved for SMEs, in some cases granting up to 100% of
eligible salary costs.

“Small to medium enterprises have formed the foundation and motor of
Germany’s economy for many years,” said Achim Hartig, Manging Director
of Investor Services at national economic promotion agency Germany
Trade & Invest.

“As the economy both in Germany and in the world recovers from the pandemic,
German government support should ensure both a sound recovery and
When the coronavirus arrived in Germany, the government’s strategy to help their employees. VAT was lowered across the board until the end of the year a wealth of opportunity for entrepreneurs from abroad to join this sector,
businesses was typically measured and thorough. The state development to stimulate consumer spending. In all, the government pledged €750bn to contributing to and benefitting from its success.”
bank, KfW, initiated a wide variety of loan programmes tailored to suit help the German economy weather the storm and recover.
companies of different sizes and developmental stages. The government
handed out small liquidity grants to micro-companies and freelancers and As a result, Germany has largely avoided the mass redundancies and DANIEL STEPHENS
also supported employees by paying the difference in salaries for part-time insolvencies seen in other countries. Consequentially, both the consumer MANAGER, INVESTOR SUPPORT SERVICES
hours, enabling companies to cut wage costs without resorting to mass and business climate indexes have picked up sharply as the economy has
redundancies. restarted. The GfK’s consumer climate indicator has risen for three straight GERMANY TRADE & INVEST
months and a value of -0.3 is forecast for August – nine points more than
Moreover, it tweaked tax system, enabling small and medium companies to July. The Ifo Business Climate Index rose from 86.3 points in June to 90.5
defer tax payments, while tax credits were doubled for value-adding – but points in July, also the third straight monthly increase. Ifo also noted that www.gtai.com
not revenue-producing – R&D activities for small-to-medium companies. manufacturing capacity utilization increased from 70.4 percent to 74.9
As the recovery from lockdown progressed, the government also recognised percent, a sure sign of many companies heading towards normality.
that some parts of the economy would take longer to bounce back than +49 30 200 099 503
others. It issued liquidity bridging grants to help companies with medium- It was no coincidence that the corona-fighting financial instruments were
term fixed costs, while extending and expanding a myriad of other measures tailored to suit small-to-medium companies. 99.5% of all German daniel.stephens@gtai.com
designed to help businesses continue to function at a basic level and protect companies are SMEs - with fewer than 250 employees and with a turnover

15. FDI ALLIANCE INTERNATIONAL