Der Spiegel reported that the German Retail Federation (HDE) is warning that rising energy costs and an already sharp decline in consumption now have Germany’s retail industry in peril

According to the business federations’ analysis, the first businesses to be bankrupted will be smaller stores in city centers, where overhead is high, and shifts in consumption can rapidly deplete a company’s operating budget.

In August retail turnover had begun to decline, as sales in real terms dropped by 1.3% compared to July, and were down 4.3% compared to one year prior, according to data from the Federal Statistical Office. Food sales fell 1.7% from July, and 3.1% year over year, hitting the lowest levels since 2017. The declines in sales continued to run through textiles and shoes, household appliances, and construction supplies.

An HDE spokesperson said the German government’s promised funding to help ease the spikes in energy prices should be reallocated to keep the retail sector alive through the downturn.

He said, “If this does not happen, we will face a disaster in many urban centers.” However he said he thinks the disaster could be avoided, through targeted investments and new creative ideas, however that would require authorities work with retailers.

He went on, “In the current acute crisis, everything is becoming a little more difficult. The money pots will certainly not get fuller for the time being… If the concepts are to work, all stakeholders in the municipalities would have to work together – from the top of the town hall to city marketing, retail and gastronomy to cultural providers and citizens.”