VCI Trend Survey: 2nd half 2009 – Somewhat livelier
business at a low level

Companies are resorting to short-time work and flexible instruments in efforts to protect permanent jobs

The chemical industry in Germany reached the trough of recession in the 1st half 2009. This is confirmed not only by official statistical data but also by the results of a trend survey among 50 member companies of the German chemical industry association (VCI). The VCI conducted this survey in June 2009.

• Outlook: Somewhat livelier business in the 2nd half 2009

Dr Utz Tillmann, director general of the VCI, sums up the overall trend of the survey: "For the 2nd half 2009 the majority of companies are expecting somewhat livelier business, but at a low level. They are anticipating positive developments mainly in the sectors of organic chemicals, polymers, and fine and specialty chemicals. Most companies believe that there will be stagnation for inorganic basic chemicals, detergents and personal care products, and pharmaceuticals."

• Employment: Companies are trying to protect permanent jobs

Pressure on companies increases with the duration of the economic crisis. The collective bargaining agreement of the chemical industry enables the use of flexible instruments, e.g. regarding working hours and remuneration. But despite these instruments and short-time work, job cuts can be no longer excluded. However, companies continue to try to protect permanent jobs.

• Investment/Research: No slowing down in innovation

The majority of companies are planning to postpone investments or to stretch investments over longer periods of time, but no stop of investments is intended. In 2009 research projects are being realized as budgeted.

• Financing: Improving, but the situation remains tense

Financing conditions are improving for the chemical industry. But in some cases, problems are persisting in the obtaining of credit. Trade credit insurance is particularly important for the export-oriented chemical industry. There are difficulties in this field, for example, credit lines are lowered or closed. Customers of the chemical industry seem to be more strongly impacted by limited access to credit. In the above trend survey, VCI member companies mention problems of their customers in the financing of orders for chemicals.

• Ways out of the crisis: Improve framework conditions in Germany

Most German chemical companies are opposed to state aid to save individual companies, if state aid goes beyond the measures of the economic stimulus packages I and II. Instead, they are demanding generally improved framework conditions - such as e.g. more investments in infrastructure and education or the promotion of future-oriented technologies.

The so-called interest barrier (Zinsschranke) makes the crisis even more acute for companies. Therefore, the interest barrier should be abolished.

• Financial markets: Chemical companies want more regulation and sustainable thinking

In order to avoid a repetition of the financial crisis in the future, the companies participating in the VCI's survey want more regulation and a stricter control of financial markets. Risk and liability should be in the right proportion to each other. Furthermore, the majority of participating VCI member companies want capital markets to be more oriented to the long-term success and development of companies, instead of pursuing short-term returns.