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The Impact of the Corona Crisis on the Trades Industry – Taking Stock

In March 2020, Prof. Dr. Gunther Friedl and Benedikt Tratt from the Chair of Controlling at the TUM School of Management published a study on the impact of the Corona crisis on the trades industry together with the Ludwig Fröhler Institute for Handicraft Science. In an interview with Handwerksblatt, Prof. Friedl reviews his previous findings.

“Two months ago, we focused primarily on the supply and demand side risks for the trades industry. Now I would focus more on the opportunities, because the Corona crisis also acts as a catalyst for innovation. A lot of companies have used the crisis as an overdue adjustment to digitize their business models. Even “deglobalization”, i.e. the return of value chains to national or regional structures, can certainly be seen as an opportunity for many enterprises in the trades sector”, he says. Over the past months, Prof. Friedl has had many discussions with companies in the industry. Especially the statements of the construction and finishing trades encouraged him: “Overall, they are not as strongly affected by the crisis as one could have expected. Many new ideas have emerged in recent weeks. Visits to customers have been replaced by video conferencing, for example. This saves travel time – now and in the future”. Nevertheless, an important and necessary aid that will help the trades industry emerge as unscathed as possible from the crisis is the short-time work allowance: “Many businesses in the trades industry are trying to hold on to their staff sustainably, even in times of crisis. In the event of an upswing, this enables them to start again with full power. The recently improved conditions for the short-time work allowance play an important role in this respect”.

Further public aid measures include loans and the deferral of payments such as taxes or social security contributions. However, everything has to be paid back at some point. Gunther Friedl says: “There are a lot of healthy businesses. For them the effects of the Corona crisis are quite feasible. Nevertheless, I also see the downside. Those who were already in economic difficulties before, will now be hit the hardest. […] The Corona crisis will quickly accelerate the structural adjustment in individual areas. Already, there are companies with a weak equity base and a high proportion of loans. However, they cannot go bankrupt at present because the corresponding insolvency regulations are taking effect. I fear that we will see a wave of insolvencies in the fall. The trades industry will not be spared from this either.”

Overall, Gunther Friedl remains confident that the trades industry and the German economy as a whole will emerge from the crisis as unscathed as possible, nevertheless: “Our economy is characterized by its medium-sized structures, which makes it particularly strong. Most of the businesses in the trades industry are long-term oriented and have an intergenerational decision-making horizon. This means their decisions, even in acute crises, are designed for long-term success rather than short-term optimization of profits. In my opinion, those who think this way will continue to be successful after the crisis and help the German economy to grow again”.

Read the full interview (in German) here.

Watch Gunther Friedl’s statement on the subject of insolvency regulations and the development of unemployment figures in the news “ZDF Heute” of June 3.

The post The Impact of the Corona Crisis on the Trades Industry – Taking Stock appeared first on Technical University of Munich – School of Management.

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