SMEs continue to recover from the coronavirus crisis, but complaints about supply chain disruptions are on the rise

• Coronavirus has become less of a threat to companies’ survival
• SMEs’ financial situation has stabilised
• But supply chain disruptions are hampering the recovery, especially in manufacturing

Despite the restrictions on contacts that were necessary to contain the third wave, SMEs have recovered somewhat from the coronavirus crisis in the past months. According to a representative survey conducted by KfW Research on the basis of the KfW SME Panel, some 2.4 million small and medium-sized enterprises (64%) were still struggling with the consequences of the pandemic in mid-May. The impact of the restrictions affected around 150,000 fewer businesses than in the previous survey in January. At the time, 68% of SMEs were affected by the crisis.

Companies experienced fewer impacts across nearly all aspects surveyed, such as turnover losses or disruptions to business operations from employee absences. Their liquidity situation has improved most notably. Nearly one in two businesses (46%) now say they have sufficient liquidity despite the crisis. At the beginning of the year, that figure was only 32%. By contrast, the share of enterprises that expect to run out of cash in two months at the latest dropped to 22% (33% in January). The coronavirus crisis is now an existential threat to only one in five enterprises, down from one in four in January.

However, supply chain disruptions are increasingly weighing on the recovery. The share of SMEs that are unhappy about this rose to 17%, up 2 percentage points from the beginning of the year. The proportion of companies reporting supply chain disruptions indeed almost doubled from the 9% reported in the September 2020 survey. Manufacturing SMEs have been most severely impacted. Nearly one in two businesses in this sector are grappling with production problems due to supply chain disruptions – a 17 percentage point increase from January. Accordingly, the coronavirus crisis continues to have a high impact on manufacturing (75%).

The Chief Economist of KfW, Dr Fritzi Köhler-Geib, commented: “The supply chain disruptions reflect not just the restrictions on cross-border trade in goods and services, but tighter pandemic containment measures adopted in many other countries. Parts of Asia in particular – important partners in global supply and value chains – were hit by a new and intense coronavirus wave in the past weeks. Many SMEs are an integral part of the global trading ecosystem and have therefore been affected by production disruptions abroad.”

KfW Research has been conducting representative surveys on the current impact of the coronavirus crisis among small and medium-sized enterprises from the main database of the KfW SME Panel in 3 to 4-monthly intervals since April 2020. The current survey is the most recent of five conducted thus far.

The Focus on Economics No. 333 entitled “Light at the end of the tunnel – the situation of SMEs is easing” is available for download at www.kfw.de/fokus.