Bureaucracy is the biggest problem for German businesses, survey finds

Bureaucracy is by far the biggest problem for German businesses, according to a survey by the ifo Institute in Munich. Half of the companies surveyed named it as their most significant challenge, with energy and labor costs trailing far behind at 27 and 22 percent, respectively.

Klaus Wohlrabe, head of the ifo surveys, explained that the administrative burden ties up personnel needed elsewhere and deters investments. This is because the costs of approval and documentation processes render projects unprofitable. This latter effect, which remains unrecorded in statistics as the projects are never initiated, is the more costly one.

The survey indicated that the burden of bureaucracy is perceived as greater in larger companies. Among large and medium-sized enterprises, it was mentioned in 59 and 58 percent of cases, respectively, compared to 33 and 41 percent for sole proprietors and micro-businesses. This is attributed to larger companies often being subject to multiple regulations, including labor law, reporting obligations, and data protection.

Other issues cited in the survey included a shortage of skilled labor (17 percent) and uncertain political frameworks (16 percent). However, for sole proprietors, uncertainty and lack of planning security (21 percent) as well as taxes and fees (17 percent) were more significant concerns.

The problem of bureaucracy was consistently cited across all economic sectors. In the industrial sector, it was mentioned by 55 percent of companies. For industry, energy costs (39 percent) represented the second-largest issue. For service providers and the construction sector, bureaucracy was mentioned slightly less frequently (46 and 45 percent, respectively).