Entire industries may disappear in Europe and the Czech Republic

Czech Republic's Minister for Industry and Trade Jozef Sikela speaks with the media as he arrives for a meeting of EU energy ministers in Brussels on Friday, Sept. 30, 2022. (AP Photo/Virginia Mayo)
By M B
3 Min Read

Businesses from within the European Union will soon be beaten by non-European competition with access to cheaper energy. The more energy-intensive the production and the more commoditized the product, the stronger this effect. Europe is, thus, threatened with the extinction of entire industries.

Chemical production, plastics, metallurgical and steel industries, glass, porcelain production, and many other industries face the threat of extinction. In addition, Czechia has the fourth most energy-intensive economy in the EU. The country is more vulnerable for other reasons as well. A large part of Czech industry consists of medium-sized enterprises that do not have sufficient strength, especially capital, to adapt quickly compared to strong international companies. In addition, the Czech economy is still mainly focused on subcontracting. Subcontractors operate on low margins and find it difficult to acquire new customers due to their dependence on major clients. But now, low margins will be impacted by higher energy prices, and it will be difficult for subcontractors to raise prices.

Companies must be able to manage the risks associated with product demand and financing themselves. Conversely, when it comes to the current shock increase in energy prices, even a right-wing economist must turn a blind eye to state intervention. Individual companies cannot manage the risk of geopolitical interventions in the supply of key raw materials. At the same time, the cessation of activity of capital-intensive industries would mean their irreversible end. No one will ever build a new steel industry in Europe.

It is impossible to save everything, and the advantage of the Czech Republic is that it still has low unemployment, so the country can afford certain structural changes. However, those businesses that deserve to survive must have a concrete idea of ​​what scenarios they are working with – at least in the medium term. In other words, what is the worst-case scenario in terms of the development of energy prices that the state will accept in the next two years or so? I am sure that most of the affected companies, if they see the ground under their feet and the light at the end of the tunnel, will find the determination to fight and survive.

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