University of Mannheim: Assessment of economic policy falls to annual low due to energy crisis and planning uncertainty

German companies are currently particularly dissatisfied with the government’s economic policy. This is shown by the July report of the German Business Panel (GBP) at the University of Mannheim. The dissatisfaction is particularly pronounced in sectors that depend on gas supplies and are unable to make long-term decisions in view of possible gas shortages and the associated uncertainty. The continuing decline in profits is also contributing to the bad mood in industry.

Data from July 2022 shows that the situation for companies in Germany is deteriorating again. Your profits drop by an average of 6.7 percent. Company executives are increasingly blaming the government’s economic policy for the deterioration in earnings. The traffic light coalition has received its worst grades since taking office: your work is currently only rated with an average of 3.9 points on a scale from zero to ten.

The assessment of the construction industry is particularly critical. In this sector of the economy, approval is only 3.4 points. The reason: construction companies are most affected by interrupted supply chains, as material replenishment is particularly critical for them. And the fact that this no longer works smoothly is, in the eyes of the company bosses, due to the government’s failed investment policy: “Supply chains are viewed as part of the infrastructure. The fact that Germany has not invested sufficiently in the transport sector for many years is aggravating the delivery problems. Economic policy is rightly blamed for this, even if this accusation should not actually apply to the current government,” explains Prof. Dr. Jannis Bischof,Holder of the chair for business administration and corporate accounting at the University of Mannheim.

The threat of a natural gas supply stop also depresses the mood
. Many respondents also fear gas rationing and further cost increases in the event that Russian natural gas supplies fail to materialize. These concerns are also reflected in the assessment of economic policy: companies that use natural gas directly in the production process or along the value chain rate the current economic policy significantly worse than those that only use gas for heating purposes or not at all. However, the federal government is not held responsible for the economic consequences of the Ukraine war.

Uncertainty in planning in the manufacturing industry
Due to the rapidly increasing procurement and energy costs, the current market environment is characterized by a high level of uncertainty – with regard to costs, but also with regard to future sales. In addition to the construction industry, the manufacturing industry is also affected, for example vehicle and mechanical engineering or the food industry. In this segment, planning uncertainty is nine percent higher than before the outbreak of the war. The risk of production losses occurring if gas supplies had to be rationed is particularly high in this branch of industry.

“The expectations of the government are clear: the reliability of the energy supply must be guaranteed and the switch to alternative energy sources must be promoted,” explains the academic director of the GBP, Dr. Davud Rostam-Afshar. “But it is also important to develop a clear strategy for the winter, because there are currently no indications that the explosion in costs has come to an end,” says Rostam-Afschar.