Country Close-Ups

Germany


German cities perform well
For this second edition of the ECER-Banque Populaire Ranking, German cities post a clear rise. German entrepreneurs seem satisfied and are generally less affected by the crisis than their counterparts elsewhere in Europe.

These results may have several explanations:

1. The crisis came late to Germany
Whereas the various European countries have faced difficulties due to the crisis since early 2008, Germany's economy only began to feel the first symptoms in mid-October 2008, i.e. six months after its European counterparts.

2. A rapid government response
The German government responded very quickly to the first signs of crisis, with numerous recovery measures:

• Bank rescue plan: passed by MPs in mid-October (2008), this €480 billion package gave banks credit guarantees to facilitate interbank lending and recapitalisation.
• Two recovery plans: a €31 billion package, adopted in early December 2008, included a change to the accounting of writedowns, tax breaks for clean vehicles, and a €20 billion lending programme by KfW. A second plan with €40-50 billion of tax breaks, social-contribution cuts, and investment in infrastructure.

3. Plentiful aid for German companies
Numerous types of aid were handed out at all levels: federal, Länder, municipality, etc. (tax-free investment subsidies, loans at very favourable rates, guarantees, tax exemptions for investment grants, business-tax exemptions, etc.).

The United Kingdom



ECER 2009 revealed high dissatisfaction among UK entrepreneurs regarding public provision for fostering business creation. This observation overturns the results of the first edition of the ranking, in which UK entrepreneurs were among the most satisfied.
Given the crisis context, why is it that UK entrepreneurs - and especially those in Birmingham - are more dissatisfied than anywhere else in Europe?

The global crisis is particularly affecting the United Kingdom

• The difficulties in the USA, China and also India are impacting heavily and directly on the United Kingdom. Despite the strong depreciation of sterling, exports are poor and the balance of trade is negative.

A weakened UK economy and major uncertainties:

• The UK economy is in recession (2009 growth forecast: -1.5%). “The recession in the United Kingdom looks like being deeper than anywhere else in Europe in 2009”. UK businesspeople are very worried, and their confidence is at record low levels (UK Quarterly Economic Survey).
• The manufacturing sector is collapsing harder here than elsewhere. The car industry has particularly suffered, especially in the West Midlands, whose economy is heavily affected, with severe marketshare losses. Business confidence has not been as low since 1998, according to a business survey (Quarterly Economic Survey, British Chambers of Commerce).
• SMEs are encountering major funding difficulties, according to the KPMG Birmingham survey - Chancellor Alistair Darling has urged the government to give SMEs in the West Midlands emergency help -, and during the crisis have received no assistance: “Birmingham businesspeople have no-one to turn to if they need any advice,” notes Professor David Walker of Birmingham Business School).

A highly unpopular government

• The UK government is highly unpopular at present, because businesspeople feel their is a glaring shortage of aid. In the government's recovery plan, consumer spending power is the priority. The SME aid plan came seven months after the onset of the crisis, and entrepreneurs consider it far from sufficient.

Banks have stopped lending

• Although the UK government has injected billions of pounds into the banking system, banks have put a freeze on business loans. The Confederation of British Industry has condemned the attitude of the banks, which are incapable of assisting UK companies.

High unemployment, with three million jobless forecast in 2009 compared to two million last year, is contributing to business owners' concerns.