SMEs continue to struggle with supply bottlenecks

The war is exacerbating supply bottlenecks. The KfW Internationalisation Report shows that 42% of German SMEs are affected.

The war in Ukraine continues to disrupt the supply chains of German SMEs. This is shown by the new KfW Internationalisation Report, according to which 42% are affected by disruptions in the supply chain. 

It is true that the proportion of small and medium-sized enterprises affected by material shortages fell from 48 per cent last September to 42 per cent in March of this year. However, this is solely due to the service sector, which is much less dependent on intermediate inputs than the other sectors of the economy. In the manufacturing and construction sectors, the proportion of companies affected by supply bottlenecks remains at 78 per cent, in the The share of wholesale and retail has even risen by 5 percentage points to 68 per cent since the autumn.

In total 29 per cent of all 3.8 million SMEs in Germany import raw materials, intermediate products or services from abroad. They are particularly affected by the disruptions in the global value chains. If we look at these companies alone, eight out of ten are struggling with supply bottlenecks. 

Price increase in response

One of the most common consequences of material shortages is price adjustments: Every fourth medium-sized company has recently increased its prices. Alongside energy prices, supply bottlenecks therefore remain a key driver of inflation. Other effects of disrupted supply chains include increased procurement costs (23 per cent), disruption to production (22 per cent), failure to meet delivery deadlines (21 per cent), stockpiling (11 per cent) and rejection of orders (9 per cent). By contrast, negative effects on employment remain limited (3 per cent) and are concentrated in the construction and manufacturing sectors.

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„In 2021, international business should also have recovered somewhat in the SME sector. Based on our surveys, we expect an increase of a good 6 % to EUR 566 billion. This means we are still below the pre-crisis level.“

Dr Fritzi Köhler-Geib, Chief Economist of KfW

Source: KfW

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