Sales are plummeting, employees have had their working hours reduced, and companies are laying off a large part of their workforce. Thuringia’s economy has been hit hard by the corona pandemic, plunging the state into a deep recession. A research team from the Chair of Economic Geography at the University of Jena has been examining the severity of the consequences. Although the study paints a bleak picture, it also highlights clear differences between regions and industries – and suggests that it is possible to overcome this critical situation.
»We haven’t found any winners in this crisis. Our results rather suggest that almost all companies in Thuringia are affected to a greater or lesser extent«, reports Björn Braunschweig, an expert in the regional analysis of economic cycles at the University of Jena. Over the past few weeks and months, he’s been working with a research team led by him and the Economic Geography Chair, Prof Dr Sebastian Henn, to analyse over 900 surveys on the effects of the corona crisis completed by companies and freelancers throughout Thuringia.
The researchers from the Institute of Geography were quick to react to the pandemic, conducting their first anonymous online surveys in the city of Jena with the support of Jena Business Development in April – just a few weeks after the virus had reached Germany. Shortly afterwards, they decided to expand the project to the entire federal state, and they’ve since collected results from the districts of Greiz, Saale-Holzland-Kreis, Weimarer Land and Wartburgkreis, as well as the cities of Weimar, Jena, Eisenach and Gotha.
Huge declines in retail, arts and hospitality
The results reveal that companies in all sectors report a sharp drop in sales from March on. As expected, retail has been hit particularly hard due to the lack of customers during lockdown. Higher losses were only reported by companies in the arts, entertainment, recreation and hospitality sectors, where sales have declined by over 80 percent. The effects of these losses are not only borne by owners, but also their employees who have had their working hours reduced and even been released in more serious cases.
However, there are regional differences: The city of Jena and its outskirts have not been hit as hard as rural areas. »That’s mainly because Jena has a lot of high-tech companies and manufacturing businesses that are key players on national and international markets«, explains Braunschweig. In fact, no evidence has been found to support the commonly voiced theory that the corona crisis is reducing the importance of international networks.
But the pandemic did not only impact revenue and expenditure; it is also changing corporate cultures. During the ongoing crisis, almost all companies are depending on digital means of communication and finding new ways to share information. The associated obstacles have not proved too daunting for the IT sector, in which companies are increasingly based in urban areas and have the technical expertise. This is another area where companies in rural areas are at a disadvantage; they recognize the need but are often missing the technical infrastructure. According to Braunschweig, the internet connection is often so poor in sparsely populated areas that video conferencing and other web-based services are hardly possible.
Remote communication also has long-term effects on business owners. On the one hand, sustained digital communication poses a risk to cohesion amongst employees. On the other hand, the companies’ trust in external partners is put to the test. »We’re quick to forget that a functioning economy is also built upon trust«, says Braunschweig. »That’s why personal contact is essential for many companies looking to forge new alliances. Without trade fairs and similar events, this important aspect of business is completely lost«.
Demand for foreign professionals despite corona
Given the current conditions, companies in Thuringia can hardly see the crisis as an opportunity. As a result, the shortage of skilled workers can still be noted despite the many layoffs. According to Braunschweig, the problem remains and is only partially masked by the crisis: »The general shortage is the product of demographic development and will still be there after the crisis«. As a result, Thuringia will continue to depend on an influx of professionals from other parts of Germany and abroad.
As shown by the study, some companies have managed to drive innovation despite spending most of their time on crisis management. The information and communication sector and knowledge-intensive services have been able to take full advantage of downtimes caused by the crisis. By contrast, retailers have often had to spend a great deal of resources to directly combat the crisis.
The Chair of Economic Geography intends to use the results of the study to provide state and local policy-makers with concrete recommendations for action. In autumn 2020, the survey will be expanded beyond the borders of Thuringia to the neighbouring states of Saxony and Saxony-Anhalt. The survey will be repeated one year later to reliably record the long-term impact of the corona crisis.
Until then, Braunschweig hopes for structural policy reforms in addition to funding programmes and instant payments: »Policy-makers have to create equal opportunities, especially when it comes to digitalization, so that companies in rural areas aren’t left behind«. A look at Jena shows that being proactive can also help overcome the crisis: The city’s retailers, who have been hit particularly hard by the crisis, have launched a joint delivery service known as the »Anti-Corona-Delivery-Service« within the »Initiative Innenstadt« to strengthen their network in the midst of the crisis.
Text: Till Bayer
Video: Till Bayer, Irena Walinda
If you want to know more about the work of the Chair of Economic Geography at the Friedrich-Schiller-University Jena, you can follow them on Twitter or Instagram at wigeo_jena or listen to the Chair's own podcast SpacEconomics (German only).