Create incentives for environmentally friendly investments and build on the adaptability of SMEs
According to research by IfM Bonn, economic development in small and medium-sized enterprises (SMEs) initially had a significant impact on access to external capital during the COVID-19 pandemic: In the initial phase of the crisis, access to finance became abruptly more difficult for some of the SMEs because their profits plummeted. Although the measures taken to contain the COVID-19 pandemic also led to reductions in variable costs, in particular, these cost reductions were not generally able to compensate for the declines in sales, thus affecting the creditworthiness of the companies.
Over the course of the COVID-19 pandemic, however, the financing conditions for SMEs improved thanks to the numerous government support measures, with companies rating the subsidized loans and grants and the assistance with wage costs in particular as "very significant." Accordingly, by the fall of 2022, the proportion of small and medium-sized enterprises reporting major problems in accessing financing had leveled off again at pre-pandemic levels.
Paying attention to conducive framework conditions
In view of the current challenges, however, new difficulties are to be expected, according to the IfM scientists. After all, the pending ecological transformation coupled with a shortage of skilled workers and rising costs will not make the economic environment any easier. Nevertheless, the IfM Bonn scientists recommend continuing to rely on the adaptability of SMEs - and at the same time - improving their economic framework conditions. Policy instruments that are particularly conducive to this are those that increase the cost of negative external effects on the environment. This includes, for example, taxing CO2. In this way, incentives are created for environmentally friendly investments. At the same time, economic policies should not further increase bureaucratic burdens regarding corporate financing of SMEs. This makes borrowing costs rise - and lowers the incentives to invest in the green transformation.
