Survey: Bureaucratic burdens in small and medium-sized businesses at record high

Bureaucratic burdens are becoming an increasingly serious problem for small and medium-sized businesses. According to a survey conducted by DZ Bank and the Volksbanken and Raiffeisenbanken (Cooperative Banks), these regulations are hindering business success – even more than the shortage of skilled workers.

This article is part of the special topic Bureaucratic madness in the craft industry

Bureaucracy is becoming an increasingly large obstacle for small and medium-sized businesses. According to a representative survey by DZ BANK and the Federal Association of German Volksbanks and Raiffeisenbanks (BVR) Among more than 1.000 medium-sized companies, 82 percent of respondents stated that increasing bureaucracy is hindering their business success. Six months ago, this figure was 75 percent. This is the highest figure since fall 2013.

"The study results make it clear that regulatory requirements and bureaucratic burdens are becoming an increasingly serious problem for small and medium-sized businesses. The jungle of regulations must be cleared in order to release the existing growth forces and strengthen Germany as a business location," says Marija Kolak, President of the BVR.

Increasing bureaucracy, shortage of skilled workers, high taxes

The agricultural sector (93 percent) and the food industry (92 percent) are particularly affected. However, many companies in the chemicals industry (81 percent) and trade (80 percent) also complain about the bureaucratic burden. The bureaucratic problem is now even greater than the Skills shortage, which three quarters of medium-sized companies complain about. In addition, every second medium-sized company complains about high tax burden.

Willingness to invest decreases slightly

Companies' willingness to invest has declined slightly and currently stands at 67 percent, below the long-term average of 73 percent. Only 19 percent of companies plan to increase their investment volumes in the next six months. "It's good that the willingness to invest has at least not decreased further despite the increasing burdens on day-to-day business," says Uwe Berghaus, Board Member for Corporate Banking at DZ BANK. "Nevertheless, given the massive need for transformation, the level is clearly too low. Many medium-sized companies are investing primarily to reduce costs in the long term."

Differences between industries

In the chemical and plastics industry, the willingness to invest increased from 71 to 80 percent. Increased investments are expected in the electrical sector and in the metal, automotive and construction industriesIn the agricultural sector, however, a decline in investment is expected – only slightly more than half of the companies plan to invest, the lowest figure since autumn 2014. 

The Energy costs are currently burdening almost two-thirds of companies, compared to almost 88 percent in autumn 2022. Expensive raw material and material costs are now only a problem for one in two companies, compared to four out of five in autumn 2022.

Balance sheet quality deteriorates again

The Balance sheet quality of medium-sized companies has deteriorated again in 2023 and is at its lowest level since 2012. The dynamic leverage ratio has decreased by 25,5 points since 2022, which affects the ability of companies to repay debt from cash flow. Equity ratio has fallen and is at its weakest level since 2018, but still above the levels seen in the early 2000s.

Source: BVR

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