“Closed” is written on the brass plate that dangles in the shop door of Anke Runge’s bag manufacturer. The designer has been in corona lockdown since December 16 and, like many other retailers, is no longer allowed to receive customers in their business premises in Berlin-Mitte. When DW reported on Anke Runge at the end of November, her economic situation was already tense. How is she now, under the even more difficult conditions?
Anke Runge stays afloat in lockdown with contract work
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“Of course bad,” says Runge, who continues to sit and work every day in the back of her shop in the workshop. Instead of designing and sewing bags, she makes containers out of fireproof material. A welcome third-party contract that keeps you afloat financially. “My landlord has given in and waived me six half a month’s rent. That helps a lot,” reports Runge. “But I keep thinking about giving up the business.”
It looks even worse in gastronomy
How it is when entrepreneurs give up and close their business can be seen in the catering industry. Restaurants, cafes, bars and pubs had to be locked down on November 1st. In order to keep their financial damage within limits, the Federal Economics and Finance Ministers promised generous financial aid. They were initially called November aid because the lockdown was initially scheduled for four weeks. As is well known, that was only wishful thinking and so the December aid came on top, which is now being supplemented by further financial aid.
The doors are closed: The Quartier 206 shopping center in Berlin’s Friedrichstrasse
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The promises were abundant at first: In November and December, the innkeepers should get reimbursed 75 percent of the turnover of the previous month. It was not taken into account that the companies in lockdown did not have to buy any goods, for example food and beverages, and therefore had far lower costs. A restaurateur told DW that he and many other colleagues would have more money in their cash register than they would normally have made with an open restaurant.
The joy was short-lived
But there was no money for now. There were software problems with a program that the federal government wanted to make available to the states so that they could receive the applications and make the payouts. There is no central cash register in federal Germany. Funding programs are handled by the state’s own banks. The computer program was only ready for use shortly before Christmas.
The closings go into the fourth month
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An embarrassing mishap that the Federal Ministry of Economics would have preferred not to speak about in public. As the complaints about the lack of financial aid grew louder, there was the option of advance payments at short notice. But they could not amount to more than 10,000 euros. This is a drop in the ocean, especially for large restaurateurs and chains. You are not allowed to apply for help for each individual branch, but only for the group as a whole.
Veto from Brussels
There were also problems with European state aid law. If an EU state wants to support its companies financially, this has to be approved by the EU Commission. This is to prevent distortions of competition in the Union. The EU Commission initially insisted that grants of more than one million euros should only be paid out if the recipient actually remains in the red after deducting the costs.
As a result, Germany had to change its funding conditions. Another embarrassing glitch for the Department of Commerce, which made the changes without communicating them openly. The EU Commission only gave in on January 21st.
The ceiling for aid has been raised from one to four million euros. There was also the green light to either reimburse 100 percent of the losses incurred or, as planned, 75 percent of sales for the months of November and December.
“We’re running out of air!”
For many restaurateurs, help comes too late. In mid-January, the “Host Group” initiative, in which around 40 companies, some of them large companies with many branches, are united, made a desperate appeal to the public. Because of the lack of help, three quarters of the companies are in dire financial straits. The payouts are now vital. Mirko Silz, head of the pizza and pasta chain L’Osteria: “Apparently politicians only keep an eye on sloppy listed companies, but they don’t see the distress the gastronomy is in. We feel left in the lurch.”
The steak house chain Maredo filed for bankruptcy in mid-January
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The situation is also becoming increasingly precarious for retailers. The current extension of the lockdown adds up the closing time for trading to two months and no one can currently say what will happen afterwards. Textile and shoe stores suffer particularly badly. You currently have 50 percent more winter goods on the shelves than normally at this time. Wool sweaters and fur boots should go on sale now, because they are getting more and more unsaleable every day. At the same time, spring fashion is rolling in, which needs to be paid for and is usually financed from sales.
A turnover of 600 million euros per day is missing
The General Association of the German Textile and Fashion Industry warns that the renewed lockdown extension is driving the industry in Germany to ruin. Avoiding a bankruptcy wave is a race against time. But things are not looking rosy for other retailers either. “The retail trade affected by the lockdown loses an average of 600 million euros in sales on every closed sales day in January,” calculates Stefan Genth from the German Retail Association (HDE).
Large fashion chains handle the sale online, customers can pick up the ordered goods on site
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In a survey by the HDE, 60 percent of retailers state that they will not survive the year financially without government support. The retailers were able to apply for bridging aid in November and December, but only when sales fell by 30 percent. Bag designer Anke Runge is currently experiencing the consequences of this regulation. Business was so bad in November that she asked for help. In December, until it was closed on the 16th, it was – surprisingly – such a good Christmas business that it broke the funding ceiling.
1,300 euros left on the business account
Runge estimates that she will have to repay 6,000 euros and expects a large claim from the tax office because of the unexpected income. Normally, she could offset staff costs and bills for leather and other raw materials for tax purposes. But because of the bad business situation caused by the corona in 2020, she fired her employees, barely bought anything and preferred to help herself from her warehouse. That has now shrunk and, if it is allowed to open again, it urgently needs to be increased. But what money?
“The bottom line is that I’m in a worse position than if I hadn’t sold anything in December,” said Runge, who can only shake her head at the chaos of Corona aid. After having to pay insurance premiums at the end of the year, she currently has 1,300 euros in her business account.
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