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Business German Market

15,000 German stores facing closure (Photo by Gregor Fischer/Getty Images)

By Tyler Hummel Leaders Staff

Tyler Hummel

Tyler Hummel

Tyler Hummel is a news writer for Leaders Media. He was the Fall 2021 College Fix Fellow and Health Care...

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Oct 4, 2022

A Real Threat to German Stores

Tens of thousands of stores in Germany are facing closures due to skyrocketing energy prices. 

Key Details

  • The German Retail Association (HDE) has written a letter to Vice-Chancellor Robert Habeck that warns that stores are facing an existential threat, as they are unable to make consistent profits. 
  • “The group called the situation ‘existentially threatening’ and said that around 16,000 businesses may go bankrupt this year, while the ‘negative trend’ is likely to continue through 2023,” says news network RT. 
  • HDE is warning that energy costs have spiked more than 147% since January. 
  • “The share of electricity costs in sales volumes for retailers has already reached almost 3% on average and many in the industry expect this figure to rise to as high as 5% in 2023,” says RT. 
  • Operating profit has shrunk into the negatives in several sectors of the economy, namely shoes which are operating at a -1.2% profit margin. Food is only operating at 2% to 4%.
  • Germany’s inflation rate is nearly 10%, Der Spiegel reports.

Why it’s important

The entire European economy is facing a crunch this winter as energy skyrockets prices but the effect of this is going to crush small businesses and potentially damage the supply chain for necessities. 

As we previously reported, the EU is facing an ongoing energy crisis due to the war in Ukraine. The recent shutdown of the Nordstream pipeline has contributed to Europe’s ongoing energy crisis, forcing the nationalization of industries, and creating a need to find energy-dependent solutions. 

The EU is even facing additional pressure to crack down on energy consumption, with the IEA saying a 13% decrease is necessary for Europe to survive the winter. This decrease will mostly affect small businesses and homes. 

The emergency is placing a crunch on small businesses with limited profits and skyrocketing energy prices. It is no surprise that nearly 16,000 German businesses are on the line. 

Notable quote

“The trade association is now demanding measures from Habeck to counter ‘ruinous peak loads’: the ‘maximum expansion of the energy supply,’ a temporary electricity price cap and a reduction in electricity tax to the EU minimum and ‘effective hardship aid’. On Thursday, the federal government presented new measures to combat high gas prices,” says Der Spiegel. 

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