According to the Ifo Institute’s economic survey, half of German companies identify bureaucracy and regulatory burdens as the greatest challenge facing the German economy. These issues are followed by energy costs, cited by 27% of businesses, and labor costs, which rank second at 22%.
Klaus Wohlrabe, head of the Ifo surveys, explained that bureaucratic overload impacts firms in two ways: first, it ties up personnel who are needed elsewhere; second, it deters investments when the costs of obtaining permits and conducting necessary documentation are factored in. He noted that this second effect, which makes projects pricier, rarely appears in statistics because the plans are never initiated.
The level of concern regarding bureaucracy varied by company size. Solo self-employed individuals cited it least often (33%), while small businesses with under ten employees reported it as a problem 41% of the time. The difference in perception was smaller among medium (58%), small (50%), and large (59%) enterprises. Wohlrabe elaborated that companies with employees, assets, and export operations are affected by numerous regulations-ranging from labor law and reporting duties to data protection laws. He clarified that self-employed persons and micro-businesses are spared from many of these requirements until they reach a certain operational size, at which point they are subject to them almost simultaneously.
Sector-specific differences highlight varying problems. In the industrial sector, 39% cited energy costs as a major location issue, a rate significantly higher than the 17% reported by the service sector. The construction industry frequently points to the lack of skilled workers (29%) and drawn-out permitting procedures (13%). Conversely, weak consumer demand is the primary concern in the trade sector, cited by 25% of businesses-more than in any other industry.
Self-employed individuals focus on different concerns than those in companies with permanent staff. They notably cited uncertainty and poor planning security more often (21%), as well as taxes and levies (17%), whereas labor costs and skilled worker shortages were less important to them.
Overall, the most frequently mentioned topics across all surveyed businesses were the shortage of skilled labor (17%), political framework conditions (16%), taxes and levies (13%), and a general lack of planning certainty (13%).
