German firms warn of ‘immense’ cost rises due to Iran war

The war in Iran is triggering a “noticeable chain reaction” in the German economy, with “immense cost increases” for companies, according to the Association of German Chambers of Industry and Commerce (DIHK).

Sudden price hikes and purchasing prices that change daily are making it almost impossible to plan based on reliable figures, the association said on Tuesday.

In a DIHK snap survey of around 2,400 businesses carried out in the first two weeks of April, 83% of companies said they were experiencing negative effects on their operations. In the manufacturing sector, the figure was 87%.

Companies most frequently cited higher freight and transport costs and higher energy prices as the biggest problems.

In addition, 58% of businesses reported rising prices for raw materials and other materials. “The wave of costs is rolling through companies,” said DIHK chief analyst Volker Treier. There was a knock-on reaction along the entire value chain, he said.

Restraint on investment, expanded risk management

Many businesses are already responding with price increases and curbing investments, according to the DIHK. While half of companies say they are passing on additional costs, more than one in three (37%) are postponing investments or projects. In addition, 43% are expanding their risk management teams.

All of this is making it ever harder to position Germany as a good place to do business, Treier said.

“Our economy has been in crisis mode for six years and we have to do everything we can to be able to hold our own in this geopolitical situation.”

The government should carry out far-reaching reforms to cut costs, reduce bureaucracy and speed up procedures, he argued.