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Only one in six German Mittelstand firms say standoff with Russia hurting them

Published 26/08/2014, 10:53

BERLIN (Reuters) - Only one in six of the small- or medium-sized firms that make up the backbone of Germany's economy say the standoff between Russia and the West over Ukraine is hurting their business, a survey by consultants EY showed on Tuesday.

Some 83 percent of Germany's "Mittelstand", the often family-owned firms to which the euro zone's biggest economy owes much of its exporting prowess, say the tensions between Moscow and the EU and United States are not affecting business.

Only 5 percent said the crisis was having a "significant" impact on their business while 12 percent said it was having a "marginal" effect. Industrial firms were the hardest hit.

That contrasts with Ifo's closely watched survey of business sentiment, which slipped for the fourth consecutive month in August, largely due to concerns about the Ukraine crisis and the impact of sanctions on Russia.

Data last week showed the value of German exports to Russia fell 15.5 percent in the first half of the year. Germany's Committee on Eastern European Economic Relations said they could fall by up to 25 percent this year as a whole.

The EY survey showed a sixth of Mittelstand firms are active in Russia. But only one in 11 said they had seen a drop in orders due to the Ukraine crisis, just one in 17 said sales were falling in eastern European markets and only one in 20 said it was losing turnover due to currency fluctuations.

Geopolitical tensions associated with the Ukraine crisis are a major concern for just under a fifth of the firms surveyed, the results showed. Most were more concerned about high energy costs, the weak development of the German economy, which contracted in the second quarter, and sluggish economies abroad.

More than half of the companies polled were satisfied with their current business situation - the highest level since the survey was started in 2003.

Around one fifth said they planned to boost investment this year, though that was slightly lower than at the start of the year. Industrial firms were the most willing to invest.

On average, Mittelstand firms expect sales growth of around 1.3 percent - slightly lower than the 1.5 percent they had forecast at the start of the year, according to the survey of 700 firms which was conducted in June and July.

The survey defines Mittelstand firms as businesses with between 30 and 2,000 employees.

Germany's Committee on Eastern European Economic Relations, which represents German business interests in Eastern Europe, said on Monday the country's exports to Russia could fall as much as 20-25 percent this year due to the effect of sanctions.

(Reporting by Michelle Martin; Editing by Hugh Lawson)

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