Business-related Services Sector: Improved Economic Situation

The economic situation in the business-related services sector gained further momentum in the first quarter of 1998. The assessments of the situation regarding turnover, demand and employment improved not only compared to the same quarter a year ago but also compared to the previous quarter. The overall economic conditions for a continued upswing in the business-related services sector are evaluated positively.

More Apprenticeship Positions Expected, Employee Training as Important Factor

This business sector in particular will benefit from a boost in domestic demand which is expected by plenty of economic experts. While the favourable economic situation leads to an increase in employment, the willingness to train apprentices in the business-related services sector remains unchanged, at least in the short term. Between 1996 and 1998 the percentage of apprentices against the total number of employees remains almost unchanged with 4.5 per cent.

The demand for further employee training likewise persists at a high level. More than 80 per cent of business-related services providers consider it necessary to upgrade the education of their employees as a continuation to their initial vocational training. These are the findings of a representative study carried out by the Centre for European Economic Research (ZEW) in Mannheim in collaboration with the “Verband der Vereine Creditreform” in Neuss in March 1998. The business-related services sector encompasses tax advisors and certified public accountants, business consultants, architects, technical consultants and planners, vehicle renting, machine renting, forwarding companies and logistics firms, software providers, advertising agencies and waste management firms.

Waste Industry Facing Downward Trend

There are, however, some differences between the individual industries of the business-related services sector regarding the economic situation. Apart from architects and technical planners, sewage and waste disposal contractors are turning into problem children. For this industry, almost all economic indicators have deteriorated compared to the same quarter one year ago as well as to the previous quarter. Especially the income situation is evaluated critically. Just like architects and technical planners, businesses in the waste industry are not only affected by a decreasing demand for their services but also by competition from “pseudo-privatised” public enterprises.

Many municipalities decided to outsource supply and transport companies to independent companies which provide disposal services and planning services for the municipality and, at the same time, expand their business fields. The sewage and waste disposal industry takes on a critical stance, in particular towards the forecasts for the disposal industry which had been too optimistic. Overcapacity was the result.

Europe Fosters Demand for IT Services

By contrast, forwarders and warehousing enjoy a good economic situation. As a consequence, the demand expectations are particularly positive for this industry. IT service providers and business consultants continue to experience a veritable boom. This development is still the result of a solid demand for information technologies and communication technologies which have spread to almost all economic sectors. The changeover to the year 2000 and the switch to the euro come in addition.   

Eastern Germany Slightly Stabilised

Despite trends towards stabilisation, the situation for business-related service providers in Eastern Germany remains critical. This is particularly down to the weak state of the construction industry and the overall sluggish development of the Eastern German economy. For the time being, no new impulses are expected. The economic situation for Eastern German business-related service providers continues to be far worse in comparison to their Western German competitors. After all, a stabilisation of the situation emerges. For the first time since the second quarter of 1996, seasonally adjusted, the proportion of businesses with an increase in demand is slightly higher than the share of businesses having to cope with dwindling demand. Especially the income situation is evaluated critically for Eastern Germany. It therefore remains to be seen whether the slight upswing in the staff situation displayed in the first quarter of 1998 will continue. Regarding the sustainability of this development, one has to be cautious.

IT Service Providers’ Willingness to Train Apprentices Sharply Increased

The good economic situation of IT service providers and possibly also the introduction of new professional profiles in mid-1997seem to have a positive influence on the willingness to train apprentices in this industry. While the share of business-related service providers offering apprenticeship positions almost remained unchanged between 1996 and 1997, the proportion of IT service providers training apprentices has increased by ten percentage points to 43 per cent.

For this industry, apprentices will also continue to be of increasing importance in the future. According to the ZEW/CREDITREFORM survey, about 30 per cent of IT service providers are planning to create further apprenticeship positions in the coming three years. A clear majority of business consultants and forwarders equally expect an increasing number of apprentices. This development possibly is a reaction of business consultants and IT service providers to the increasing difficulties of filling vacant positions with qualified applicants. Taken as a whole, the business-related service sector will create further apprenticeship positions within the coming three years.

The majority of companies surveyed by ZEW and CREDITREFORM intend to hire further apprentices during this period. Exceptions are tax advisors and certified public accountants, as well as technical consultants and planners (probably due to the difficult economic situation), who are more likely to cut the number of apprentice positions in the coming three years. Thereby it must be taken into account that tax advisors and certified public accountants employ a particularly large amount of apprentices with an average of 13 apprentices per 100 employees.    

Technical consultants and planners as well as vehicle renting businesses also have a relatively large proportion of apprenticeships with a share of about six per cent, respectively. The waste industry and business consultants lag with a share of two and three per cent, respectively. According to the ZEW/CREDITREFORM survey, about one fifth of the businesses who hired apprentices in 1997 had difficulties in finding suitable candidates for vacant apprenticeship positions.

Professional Training Very Important

Apart from professional vocational training, in-house measures also play a significant role in times of rapid technological progress and global competition. A huge majority (88 per cent) of the business-related service providers surveyed by ZEW/CREDITREFORM believes that there is a need for professional training that goes beyond the initial vocational training. Tax advisors and certified public accountantshave the greatest demand for professional training with about 96 per cent, as well as technical planners and consultants with 90 per cent, while vehicle renting businesses and warehousing see the lowest need for professional training with about 60 per cent each. The most pressing training goals are extending the initial vocational training as well as entering into a new field of activity.

Professional Training Only in Combination with Professional Experience

More than half of the business-related service providers only make use of professional training measures in the case that the employee already is professionally experienced. This is in accordance with the primary training goals “extending the initial vocational training” and “entering into a new field of activity”. As a result, professional training does not only serve as a means to adapt to new technologies but also as a preparation to manage new tasks within the context of internal career prospects.

Professional training measures which accompany or immediately follow initial vocational training are less frequent.

Contact

Prof. Dr. Ulrich Kaiser, Phone: +49(0)621/1235-134, E-mail: kaiser@zew.de

The economic survey has been carried out quarterly by ZEW and Creditreform since the second quarter of 1994. The random sample is frequently refreshed by start-up companies. The results of the survey are published in the ZEW Services Sector Report. In addition, we provide this report on the internet as a special service, at the following address: http://www.zew.de/en/