Mannheim Corona company survey: General rule of November aid disadvantages some heavily affected industries

New Delhi: 
The first corona wave already severely affected many companies in Germany. The second lockdown is once again confronting companies with major challenges. The state has therefore extended the economic stimulus program and expanded the aid measures. However, the most important factors are the effectiveness and accuracy of state aid. The study by the German Business Panel at the University of Mannheim therefore examines how effective the measures actually are: Who benefits most from state aid? How does the 75 percent flat rate for November aid work? Who has reduced prices since the VAT cut?

In the sectors that were hardest hit, the state aid measures have had a certain positive effect. But that is not always enough to decisively increase the probability of a company’s survival. This is what the new study shows. In the case of trade fair and congress organizers or travel agencies, for example, the probability of survival due to government aid increased by a good 30 percentage points, but even with this it is still below the 60 percent mark.

In the less severely affected sectors, government aid in some areas (e.g. agriculture, public companies) had almost no effect – even if it was used. “For better targeting of the measures, it is therefore important to think about more effective access requirements for the use of the assistance,” argues Professor Dr. Jannis Bischof from the University of Mannheim. Bischof holds the chair for general business administration and corporate accounting and is co-author of the study.

At the beginning of November, the companies were promised new corona aid. For example, companies should be reimbursed up to 75 percent of the sales they generated in November 2019. “It is interesting that this blanket regulation causes less bureaucracy and administrative effort. This is exactly what was clearly criticized about the measures in the spring, ”said Bischof.

“However, there are significant differences in the cost structures in the data, even within the sectors that are again affected,” he adds. “Some companies find it very easy to reduce costs flexibly and at short notice. You benefit greatly from the flat rate refund. Other companies have rigid cost structures, for example because of long-term contracts. ”According to Bischof, the flat-rate reimbursement could be disadvantageous for these companies and sometimes not be enough to ensure economic survival. However, it is precisely these companies that are typically characterized by particular social responsibility towards their employees.

Another result of the study concerns the reduction in VAT. The data shows that the VAT cut has not resulted in lower consumer prices in many hard-hit industries. In many industries, companies even raised prices. “Nonetheless, the temporary reduction in VAT could still have an effect,” notes Professor Dr. Philipp Dörrenberg, another co-author of the study. Dörrenberg holds the chair for general business administration and business taxation at the University of Mannheim. “The companies have to pass on the cost pressure that is due to the current circumstances. That leads to higher prices. Due to the reduction in VAT, these required price increases may be smaller,

The study “Empirical findings on the second lockdown: Who bears the burden and how do the state aid measures work?” Is based on the surveys of the German Business Panel, which is the long-term survey panel of the DFG-funded supra-regional collaborative research center “Accounting for Transparency”. Regular follow-up studies, including on tax policy and regulatory changes in the wake of the Corona crisis, are planned.