One in six German industrial firms plan production cuts due to expensive energy - survey

Expensive energy is forcing almost one sixth of German industrial companies to throttle production, if not halt it altogether, reveals a survey by the Association of German Chambers of Industry and Commerce (DIHK). A quarter of the companies feeling compelled to cut production have already done so, while another quarter is in the process of doing so, according to the survey conducted on 3500 firms. Energy-intensive companies, such as those in the steel, paper and glass industries, have particularly been hit by the inflation of energy prices: 32 percent of energy-intensive companies are considering or have begun reducing production, and some plan to discontinue certain production lines partially or in some cases fully.

Almost two thirds of industrial companies see high electricity and gas prices as a threat to the competitiveness of Germany as a business location, DIHK said. “Many companies are also currently finding that they are unable to pass on to customers the price increases they themselves have experienced in direct or indirect international competition to a sufficient extent”, DIHK President Peter Adrian said.

Prices for nearly all forms of energy rose rapidly in the second half of 2021 due to a variety of factors, including catch-up effects after the coronavirus pandemic. This trend accelerated due to Russia's invasion of Ukraine, which triggered a rush to fossil fuels in anticipation of trading restrictions and fuelled general inflation rates. There is concern that the skyrocketing prices of gas and oil could spill over into the electricity market, which would further damage struggling businesses in Germany.