GBP Monitor: Companies reduce investments and job openings in anticipation of energy embargo and further cost pressure

The war in Ukraine has serious consequences for the German economy. The negative effect this crisis will have on the future is becoming more and more apparent: The May survey by the German Business Panel of the University of Mannheim shows that the proportion of companies planning new investments and new job openings has reduced by 32 percent and 12 percent, respectively, since the war broke out. Among those companies are, in particular, companies that depend on resources from Russia and use natural gas in their production. Companies are already preparing for an energy embargo and a further rise in energy costs.

The data from May 2022 show that more and more businesses have been cutting new investments since the war in Ukraine broke out: In mid-February, almost 60 percent of German companies were still making new investments. This number has decreased to 40 percent as of late.

Especially the companies that depend on materials and resources from Russia, e.g., on natural gas for their production, are now taking precautionary measures: Companies that employ gas in their production processes or along their supply chain are 21 percentage points less willing to make new investments than those that use it only for heating. “Many companies already expect bottlenecks in energy supply – and take this expectation into account when making decisions. Investments and job openings at these companies are plummeting, which means that many of these companies are paralyzed,” explains Professor Jannis Bischof, holder of the chair of Business Administration and Accounting at the University of Mannheim.

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