Small Businesses Slam Germany's Business Climate: Too Much Red Tape and High Energy Costs
Small and Medium Enterprises (SMEs) in Germany assess their nation's location negatively - Lowest Ranking Nation within the European Union Community
Small and Medium Enterprises (SMEs) in Germany are voicing their frustrations with the country's business environment, calling it cluttered with excessive regulations and high energy expenses. In a survey conducted by Forsa for Commerzbank, Germany ranked 9th on a list of economic nations, falling behind Italy and Vietnam.
Out of the 1,525 companies polled between mid-November and mid-February, only 10% rated Germany's business conditions as "very good" or "good." Sixty percent consider them "satisfactory" or "adequate," while almost a third (29%) view them as "inadequate" or "insufficient."
More than seven out of ten (71%) of the surveyed companies across all industries believe that the label "Made in Germany" has significantly lost its value. The business sector holds high hopes for a new federal government to deliver positive stimuli.
Germany's trade spat with the USA adds to the uncertainty. Many businesses are reportedly actively exploring new markets for their products, attempting to increase prices to offset higher custom costs due to the trade standoff.
According to a survey by DZ Bank, industries such as metal, automotive, and machinery will bear the brunt of the US tariffs and counter-tariffs. Overall, 15% of the 1,007 SMEs surveyed see themselves directly impacted by the US tariffs, with 50% fearing indirect consequences, for instance, through price increases from suppliers.
The potential EU counter-tariffs could have an even more profound impact on SMEs. Almost a third (29%) of companies expect higher purchase prices due to EU counter-tariffs, while 46% fear effects on their suppliers. The data for the DZ Bank survey was collected in March, before US President Donald Trump announced his massive tariff package. However, it was already known at the time that the USA would impose 25% tariffs, for example, on car and steel imports. In early April, Trump threatened the EU with additional surcharges of 20% on imports into the USA. These surcharges are currently suspended, and the EU has temporarily shelved its planned counter-tariffs on US goods, hoping for a negotiated solution.
Smaller SMEs vs. Bureaucracy
SMEs in Germany see the reduction of bureaucracy as their most critical challenge, with 98% identifying it as an urgent task, including fewer regulations to streamline operations[3]. High energy costs and a hefty tax burden also adversely affect 29% and 21% of the surveyed SMEs, respectively[3].
Pursuing Digitalization and Internal Improvements
Despite the economic hurdles, SMEs continue to invest in digitalization, with 35% of businesses completing recent projects and digitalization expenditure on the rise. However, there's a noticeable digital divide between large and small SMEs[4]. To improve their competitive edge, SMEs are focusing on investments in employee qualifications, process optimization, and corporate culture. Cybersecurity and AI are also seen as lucrative areas for investment[3].
While there's no explicit reference to construction sites in the provided sources, the overall economic environment is expected to remain steady but not particularly dynamic in 2025[5]. SMEs in Germany are primarily focusing on internal improvements and cost management, while advocating for external help through reduced bureaucracy and enhanced infrastructure conditions.
- The Community policy should address the issue of excessive regulations and high energy costs, which are major concerns for small and medium enterprises (SMEs) in Germany, according to a survey conducted by Forsa for Commerzbank.
- The inadequate business environment in Germany is reflected in the responses of the 1,525 companies polled, with only 10% rating it as "very good" or "good," while 29% view it as "inadequate" or "insufficient."
- In hopes of positive stimuli, the business sector is looking towards a new federal government to deliver changes that will improve the business climate, especially in reducing bureaucracy, which is the most critical challenge identified by 98% of the SMEs surveyed.
- Vocational training programs could play a significant role in improving the competitiveness of SMEs by investing in employee qualifications. This is one of the areas SMEs are focusing on to improve their corporate culture and competitive edge, along with process optimization and investments in cybersecurity and AI.
