The consultant climate surveyed by the Munich Ifo Institute for the Handelsblatt slipped to an all-time low in April. More than 55 percent of the consultants surveyed expected their business situation to deteriorate – for the first time the number of pessimistic voices in the industry outweighed the optimistic ones. But at least: Almost a third of the consultants were satisfied with the current business situation even in April.
The mood in the industry has clearly recovered in the past two months. “The area of legal and tax advice and auditing seems to be coming through the corona crisis with a black eye,” says Ifo expert Klaus Wohlrabe, who is responsible for the representative survey. After all, 38 percent of consultants are currently satisfied with their current business situation, 29 percent have a relatively large order backlog, and a good quarter report higher sales than in the previous year.
But even though these survey values are far better than in most other sectors, the data are still historically bad: “You could not see such values for years,” emphasizes Wohlrabe.
The seasonally adjusted business climate for the industry now stands at 9.8 points in the middle of the year, after 1.3 points in May and –15.8 points in April. For comparison: the all-time lows so far for the industry come from the summer of 2006 when the index dropped to 12.2 points. The low during the 2009 recession was 14.9 points.
Declining orders
“The corona crisis has presented lawyers with unprecedented challenges,” said the managing director of the German Lawyers’ Association (DAV), Sylvia Ruge, the Handelsblatt. Exit and contact restrictions would have unsettled many clients and prevented them from visiting law firms. Many law firms are now facing enormous economic losses.
Ruge refers to a recent survey by the Federal Bar Association, which shows that around 17 percent of respondents each complain about a drop in new client numbers of up to 50 or up to 75 percent. Overall, 70 percent of the survey participants had fewer new mandates from the beginning of the crisis than in the six months before. It may take up to two years for some law firms to overcome the crisis and its effects.
The declining order situation is also noticeable in pricing: According to Ifo, only about every eighth company wants to increase its prices in the near future. At the beginning of the year, almost every second consultant wanted to turn the price screw in the coming months. Now the vast majority are calculating with stable prices.
According to their own statements, the profession of auditor was able to “largely” carry out the existing orders, especially the final exams, thanks to a “good technological position” in the corona crisis.
“In the project business, in particular in the case of consulting contracts, there has been a partial decline, which has so far been compensated for by new consulting needs, such as the handling of government aid packages,” reports Melanie Sack, executive board member of the Institute of Public Accountants (IDW ). “The development in the fourth quarter will be decisive – especially whether a second wave is coming and when a vaccine will be available,” says Sack.
Crisis advice necessary
The German Tax Advisor Association (DStV) also registers more advisory activities through the government aid packages: day-to-day business, as tax advisors have been used to for a long time, does not currently exist. New tasks are constantly being added, such as advice on applications for short-time work benefits or support for applications for KfW loans.
“Measures such as easier procedures for deferral of taxes, the reduction of advance payments made or flat-rate loss offsetting options were not long in coming,” tax adviser president Harald Elster told Handelsblatt. “It was important to inform our clients about the measures as promptly as possible – and of course also to advise and initiate the necessary measures.” In addition, the companies should have been “taken by hand” from a business perspective and cost-cutting measures had to be initiated.
The tax advisor association sees the danger that not all companies will survive the crisis well the longer the pandemic continues. Crisis advice is therefore now necessary to ensure the long-term viability of the companies.
Currently, the temporary reduction in VAT poses great challenges for entrepreneurs and their advisors. “Here, in the zeal of Actionism, the immense consequences seem to have been overlooked,” says Elster. In spite of all efforts to find solutions that are as unbureaucratic as possible, unresolved questions remained in practice. This creates legal uncertainties. “This is particularly unfavorable in a tense situation like the current one,” criticizes the tax adviser president.
The corona crisis also left its mark on personnel planning. According to the Ifo data, willingness to hire was noticeably lower in the spring. In the meantime, every fifth consulting company is expecting to increase its staff in the coming months. Only a few companies plan to cut staff, the vast majority expect a constant number of employees.
“Anyone who has to cope with financial losses should rather be reluctant to invest during this time,” says DAV managing director Ruge. However, she can also benefit from the Corona days: “The legal profession has catapulted the crisis forward with a view to digitalization.”
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