Numerous family-owned enterprises now show reluctance towards investing in Germany.
Family-run businesses form a vital component of Germany's economic structure, yet they've been hesitant to make investments for some time now. A survey conducted by the Ifo Institute reveals this holding back, with some businesses even contemplating investing outside Germany. The primary reasons behind this trend are escalating bureaucracy and red tape.
Bureaucracy has become a significant barrier to investment within Germany, as per a survey of 1,763 companies by the Ifo Institute. A whopping 91% of respondents have reported an increase in bureaucracy since 2022, with 95% of industrial companies concurring. Consequently, around 46% of these companies have delayed planned investments due to administrative hurdles encountered over the past two years. Moreover, 18% are contemplating investing abroad to bypass domestic bureaucracy.
The Foundation of Family Businesses, in collaboration with the Ifo Institute, has been publishing an annual review on the impact of bureaucracy since 2017. The survey showed that larger companies are more likely to relocate their investments abroad, with 25% of companies employing over 250 individuals planning to move investments overseas.
Major Corporations, Seething Discontent
Amongst the largest companies, a strong sense of resentment and discontent is prevalent: 57 of the biggest German family-owned companies, employing 403,000 people and generating over 90 billion euros in revenue, participated in the survey. An alarming 42.6% of these giants are contemplating a move abroad. The research team led by Ifo survey director Klaus Wohlrabe considers this figure "particularly troubling", despite acknowledging that it is a rough estimate due to the small sample size.
According to the survey, companies are less frustrated with municipal administrations, which execute executive orders, and more with the federal and state governments. Only 7% of respondents were satisfied with the performance of federal and state governments.
Paperwork Pitfall
Many companies are grappling with the fact that a significant portion of administrative processes still need to be carried out manually and cannot be completed digitally. Even where digital communication with authorities is feasible, it often fails to work as intended, according to the survey: Only 8.5% said they had experienced seamless digital interaction with the authorities.
The Foundation of Family Businesses, as the client, has once again called on politicians for improvement or relief, as they have done in previous years. "These numbers make me angry," said Foundation CEO Rainer Kirchdörfer. The primary demands include conducting a "practical review" of new regulations, expediting procedures, expanding digitization, and limiting requests from authorities to "essential information."
The Foundation of Family Businesses, echoing the concerns of large family-owned businesses, continues to advocate for reduced bureaucracy and increased digitization. As Rainer Kirchdörfer, the CEO of the Foundation, stated, "These numbers make me angry," referencing the high percentage of companies contemplating investing abroad due to burdensome bureaucracy. Furthermore, family businesses, being a crucial part of Germany's economic structure, have been affected by this issue, as highlighted in the annual review by the Foundation and Ifo Institute.
