Eye of the Storm: 30K Job Cuts and a 4% Revenue Drop for Germany's Top Companies
Reduced revenues and job cuts by leading German corporations
In an unforgiving economic climate, EY's analysis paints a grim picture for Germany's top companies. Losses are mounting, with the top 100 companies experiencing a 4% overall decrease in revenue and an average 19% reduction in operating profits. Stunned by staggering job losses totaling over 30,000, this marks the first decline in employment since 2021.
dpa-afx/kro Frankfurt
The corporate landscape of Germany is bearing the brunt of economic instability. According to EY, the first nine months of 2024 saw the top 100 market companies' revenue decline by 4%, marking a consecutive dwindle. The average operating profit (EBIT) plummeted by 19%, a departure from the slight growth observed last year. Notably, the automotive sector maintained its position at the top in terms of revenue and profit.
As the pandemic's fallout subsides, employment numbers at the top corporations have taken a turn. In just nine months, the workforce shrunk dramatically, amounting to approximately 30,000 jobs lost, roughly a 0.7% decrease to around 4.25 million employees worldwide. This downturn revives trends last seen in 2021.
"This year has been a harsh one for Germany's leading companies," remarks Jan Brorhilker, Managing Partner at EY. "Struggles abound, such as the sluggish German economy, a lack of impulses from Asia, and a slow rate of growth, oftentimes dropping below the rate of inflation." In 2023, approximately two-thirds of the top 100 German firms boosted their revenue, but that number dwindled to just over half in 2024. Fewer than half of the companies (47) posted an increase in operating profit, while a troubling 53 companies endured a decline.
Behind the Decline
The energy sector faced the most substantial revenue drop this year (26%) due to volatile electricity and gas prices. Downturns were not exclusive to the energy sector, with the chemical and automotive industries also witnessing declines of 5% and 2% respectively. On a positive note, revenue grew in the transport sector (3%) and the IT industry (2%).
Leaders of the Pack
Despite the turbulence, automakers continue to claim top revenue generators, according to EY. Volkswagen, Mercedes-Benz, and BMW hold the first, second, and third positions in terms of revenue, respectively. Deutsche Telekom leads the pack with the most significant operating profit, reporting €17.8 billion over the first nine months, surpassing VW (€12.9 billion) and Mercedes-Benz (€10.4 billion).
Outlook for 2025
Brorhilker cautions against a rosy outlook for 2025, citing ongoing geopolitical tensions, political volatility, and stagnating growth in Europe. He predicts the employment downturn to persist, with potential upticks in unemployment. "But the skills shortage remains pervasive," warns Brorhilker. To safeguard their position, he advises companies to avoid submitting to a crisis-driven mindset and instead to seize opportunities in emerging technologies. "Germany needs more calculated risks and a renewed confidence in shaping the future," he stresses.
While the banking sector across Europe reported record profitability in 2024[3], the broader picture remains grim for some industries. The implications of these trends include cost-cutting, restructuring, and workforce adjustments[4][5], potentially contributing to localized job losses in Germany. The banking sector's strong performance may belie sector-specific resiliency amidst broader economic headwinds.
- In the face of ongoing economic instability, the top 100 market companies in Germany witnessed an average decrease of 4% in revenue and a 19% reduction in operating profits (EBIT) by the end of 2024's first nine months.
- This economic downturn led to a significant decrease in employment, with approximately 30,000 jobs cut, thereby shrinking the workforce by 0.7%.
- According to EY's analysis, the automotive sector achieved the highest revenue and profit among the top 100 market companies, with Volkswagen, Mercedes-Benz, and BMW as the leading revenue generators.
- Despite the strong performance of the banking sector, the broader economic situation in Germany is forecasted to persist with ongoing geopolitical tensions, political volatility, and stagnating growth in Europe, potentially leading to further job losses and unemployment in the coming year.
