Germany’s mechanical engineers don’t have too high expectations for the coming year. This is not just due to reduced demand.
Bureaucracy, a shortage of skilled workers, high energy prices and falling demand are putting pressure on Germany’s mechanical engineering companies. The companies in Germany’s export-oriented key industry are looking into the coming year with subdued expectations, as shown in a survey by the Association of German Mechanical and Plant Engineering (VDMA) presented in Berlin on Tuesday.
At the top of the priority list from the companies’ perspective are reducing bureaucracy and the availability of qualified workers, followed by energy prices and labor costs.
“The frustration with bureaucracy and the flood of regulations are making companies extremely angry,” said VDMA President Karl Haeusgen at the Mechanical Engineering Day. He welcomed the Federal Ministry of Economics’ initiative to reduce bureaucracy. However, bureaucracy costs come from many sources. “What we need is a collective effort.” Economics Minister Robert Habeck has announced a reduction in bureaucracy for companies, especially when it comes to complex information and reporting requirements.
At the Mechanical Engineering Day, Habeck held out the prospect of a quick solution for cheaper electricity in industry. Debating for a long time instead of deciding creates uncertainty. The situation of the energy-intensive companies was not chosen by themselves, but was “in a certain sense politically created,” said the Green politician. “And it can’t be the case that Putin decides which chemical industry we have in Germany.” He suggested the industrial electricity price for this special situation.
Haeusgen criticized the proposal as a structurally conservative and oversized subsidy project. Instead, the mechanical engineers are calling for a tax reform to relieve the burden on companies and lower and middle income groups.
Order backlog lower than long-term average
According to the survey, the orders that have been declining for months are now leaving a clear mark on mechanical engineers. 60 percent of the 700 companies surveyed in October stated that they currently have a lower order backlog than the long-term average. 22 percent expect that the current inventory cannot support production in the coming year. This has consequences for sales expectations.
Every fifth company (20 percent) expects sales to stagnate in 2024, while another quarter (23 percent) expects a decline of up to 10 percent. Almost 35 percent assume an increase, including price increases, of up to 10 percent. “All of this confirms our forecast that 2024 will not be an easy year for mechanical and plant engineering,” said Hauesgen. “We continue to expect a real production decline of 2 percent.” The association also recently expected a decline in production of 2 percent this year.
Extension of average weekly working hours required
In order to combat the shortage of skilled workers, Haeusgen called, among other things, for the Working Hours Act to be made more flexible and for the average weekly and lifetime working hours to be extended. “40 hours per week must also become the new normal in the metal sector, just as it is a given in many other industries and EU countries.”
In addition, the recruitment of foreign skilled workers must be further accelerated and made less bureaucratic. However, Habeck fears that a negative attitude in the immigration authorities will make it more difficult to find skilled workers for Germany. “My biggest concern, if I can say it so openly, is that the immigration offices and visa offices have not adapted to the system,” said the Green politician. In recent years there has been an attitude: “We actually don’t want these people.” Now we have to say clearly: “Now they are wanted.”
Mechanical and plant engineering, with over a million permanent employees, has been suffering from a shortage of skilled workers for years. Given the subdued outlook, according to the survey, only a good 30 percent expect to increase the number of employees in the coming year, just under 40 percent expect stagnation and almost 30 percent expect job cuts.
VDMA press page
Source: Stern
