Berlin Germany as a business location is not very popular with founders. They rate Germany’s quality as a start-up location with a weak “satisfactory”. This is the result of an online survey by the German Chamber of Industry and Commerce (DIHK) among start-ups and young entrepreneurs, which is available exclusively to the Handelsblatt.
Above all, the constantly growing regulation and bureaucracy is viewed critically. Tax law is also considered to be complicated and burdens the founders.
The online survey is part of this year’s DIHK report on company start-ups, which will be published this week. 606 young entrepreneurs took part in the survey.
“With ever-increasing bureaucracy, high taxes, poor digital standards and rising costs, we alienate potential young entrepreneurs,” DIHK President Peter Adrian told Handelsblatt. Germany as a start-up location is becoming increasingly unattractive.
This can also be seen in the number of those who are striving to found a new company. The DIHK report shows that interest in start-ups is currently lower than at any time since the data was collected. Of course, this can also have something to do with the labor market situation. Good job prospects with almost full employment mean that fewer people take the risk of starting a business.
Too many obstacles are put in the way of founders in Germany
According to the KfW start-up monitor, the number of start-ups in Germany in 2022 fell by nine percent compared to the previous year to 550,000. In addition to the labor market situation, the research experts at the development bank also attribute this to the economic downturn.
Start-up activity – measured as the number of start-ups per 10,000 people aged 18 to 64 – was 108, close to its historical low. The start-up process in the first Corona year 2020 was still a wall when the value fell to 104.
However: The number of founders who, despite the good situation on the labor market, see self-employment as the best alternative for themselves, has doubled in the past year compared to the previous year. The desire to stand on your own two feet professionally is definitely there – but the environment has to be right.
“Germany puts too many obstacles in the way of enterprising, creative and self-confident people who want to set up their own business,” commented the Association of Founders and Self-employed Germany (VGSD) on the results of the KfW start-up monitor.
The young entrepreneurs surveyed by the DIHK have a similar view. 69 percent stated that bureaucratic obstacles had to be removed. “The time for the completion of documentation and reporting obligations often inhibits business activities,” according to the results of the survey.
Read more about Germany as a location
Entrepreneurs also expect politicians to simplify processes, for example when it comes to accessing state subsidies. “Consistently digital, user-friendly and self-explanatory funding platforms with transparent feedback to applicants would be helpful, especially in the event of rejection,” it says.
Desire for simplifications in the tax system
The results are consistent with other surveys. In a comparison of industrialized countries, Germany only ranks twelfth as a location for foreign start-up founders, as a spring study by the OECD showed. One reason for this is the sluggish digitization.
The founders surveyed by the DIHK criticize the freeze on the KfW support program “ERP Capital for Start-ups”, which according to the IHK’s experience was particularly helpful for medium-sized and larger financing volumes for start-up and follow-up projects. “Federal and state governments should quickly find solutions for this subsidy segment, which is important for medium-sized companies,” says the analysis of the survey by the DIHK.
58 percent of those surveyed want simplifications in the tax system. Among other things, the DIHK is calling for the small business threshold above which companies have to report VAT to be increased to a previous year’s turnover of 35,000 euros (currently 22,000 euros) and an expected turnover in the current year of 85,000 euros (currently 50,000 euros).
This would be based on the EU VAT system directive, which allows a small business owner limit of a maximum of 85,000 euros. In addition, the chamber is calling for the limit above which balance sheets are to be kept to be raised from EUR 60,000 to EUR 100,000 in annual profits and from EUR 600,000 to EUR 1 million in annual sales. This would also enable many young companies to prepare a less complex income surplus calculation (EÜR) instead of a balance sheet.
The founders demand that applications and forms should be written in a language that is easier to understand. That would help everyone, but especially non-German-speaking founders. Overall, many would like flexible and customer-friendly administration.
Read more about starting a business
The federal government had emphasized in the coalition agreement that it would be possible to set up companies within 24 hours. “That doesn’t just have to be the goal, we also have to achieve it,” said DIHK President Adrian. In international comparison, founding companies in Germany is too costly and complicated.
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