Smaller Businesses Criticize Germany's Business Landscape: Too Much Bureaucracy and High Energy Costs
Small- to medium-sized German businesses evaluate their locations unfavorably - Least populous nation within the Union (EU)
Small and Medium Enterprises (SMEs) in Germany, the powerhouse of Europe's economy, are giving their homeland failing grades. In a Forsa survey commissioned by Commerzbank, Germany ranks a disappointing 9th among economic nations, lagging behind Italy and Vietnam.
A paltry 10% of the 1,525 businesses surveyed between mid-November and mid-February considered the business environment in Germany as "very good" or "good". A majority of 70% feels the conditions are "satisfactory" or "adequate", while nearly a third (29%) see them as "inadequate" or "insufficient".
Notably, 71% of surveyed companies across all industries believe the "Made in Germany" quality label has significantly lost its importance. There's an expectation that a new federal government may bring positive changes.
Trade War With USA Adds to Uncertainty
The ongoing trade dispute with the USA is causing additional uncertainty. Many firms are actively exploring new marketplaces for their products, aiming to offset higher tariffs by increasing their prices.
The metal, automotive, and machinery sectors, in particular, foresee significant negative impacts from US tariffs and counter-tariffs on their businesses. Approximately 15% of the 1,007 SMEs surveyed by DZ Bank see themselves directly affected by higher US tariffs, while 50% fear indirect effects, such as price increases from suppliers.
Potential counter-tariffs from the European Union could hit SMEs even harder. If introduced, nearly a third (29%) of companies expect higher purchase prices, while 46% worry about impacts on suppliers.
The data for the DZ Bank survey was collected in March, before US President Donald Trump unveiled his XXL tariff package. However, it was already known that the USA would impose 25% tariffs, for example, on the import of cars and steel. Anecdotal reports suggest that the EU has also put planned counter-tariffs on US goods on hold, hoping for a negotiated solution.
SMEs criticsize Germany's business environment due to excessive bureaucracy, high energy costs, gaps in digitization, and a perceived decline in the significance of the "Made in Germany" quality label. These factors contribute to economic stagnation and contraction in recent years.
Despite the challenges, SMEs remain resilient, hoping for a new federal government to provide positive impulses and improve the business landscape in Germany. However, trade disputes and volatile global market conditions continue to cast a shadow over their optimism.
Enrichment Data:
SMEs encountered significant administrative burdens due to excessive bureaucracy, spending an average of 32 hours per month on legal compliance, resulting in financial costs of EUR 61 billion annually[2]. Additionally, the digital divide between large and small SMEs persists, potentially exacerbating existing economic challenges[3]. A broad trend of economic stagnation and contraction in recent years reflects concerns about the overall economic conditions[1]. The decline in the significance of the "Made in Germany" quality label contributes to the low grades given to the business environment[1].
Despite minimal direct impact, broader economic policies like tariffs and trade tensions contribute to the volatile business environment, potentially affecting consumer demand and market stability[5]. The overall trade climate influences large corporations, creating a possible ripple effect throughout the supply chain. Germany's reliance on exporting goods and its significant trade surplus with the US make it a potential target for future trade actions.
- The excessive bureaucracy and high financial costs associated with legal compliance in Germany are concerns for Small and Medium Enterprises (SMEs), leading to an annual cost of €61 billion in financial losses.
- Vocational training programs might provide a solution to the economic stagnation and contraction experienced by SMEs, as the digital divide between large corporations and smaller businesses persists, potentially exacerbating existing challenges.
- In the hope of positive changes, SMEs are criticizing the current business environment in Germany due to factors such as bureaucracy, high energy costs, gaps in digitization, and a perceived decline in the significance of the "Made in Germany" quality label.
- With a significant trade surplus with the US, Germany's economy may be vulnerable to future trade actions, and hence, the ongoing trade dispute with the USA adds to the uncertainty and volatility faced by SMEs.
){kind=link}