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 feature on bureaucratic madness in the skilled trades.

Bureaucracy is becoming an increasingly significant obstacle for small and medium-sized enterprises (SMEs). According to a representative survey conducted by DZ BANK and the Federal Association of German Cooperative Banks (BVR) among more than 1.000 SMEs, 82 percent of respondents stated that rising bureaucracy is negatively impacting their business success. Six months ago, this figure was 75 percent. This is the highest figure since autumn 2013.

"The study results clearly show that regulatory requirements and bureaucratic burdens are becoming an increasingly serious problem for small and medium-sized enterprises (SMEs). The regulatory jungle must be cleared in order to unleash existing growth potential and strengthen Germany as a business location," said 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. But many companies in the chemical industry (81 percent) and retail (80 percent) also complain about the burden of bureaucracy. The bureaucracy problem is now even greater than the shortage of skilled workers , which three-quarters of medium-sized businesses lament. Furthermore, one in two medium-sized businesses complains about an excessive 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 firms plan to increase their investment volumes in the next six months. "It's good that the propensity to invest hasn't decreased even further, despite the increasing pressures of day-to-day business," says Uwe Berghaus, Head of Corporate Banking at DZ BANK. "Nevertheless, the level is clearly too low given the massive need for transformation. Many medium-sized companies are investing primarily to reduce costs in the long run."

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Differences between industries

In the chemical and plastics industries, investment readiness is rising from 71 to 80 percent. Increased investment is also expected in the electrical, metal, automotive, and construction sectors . In contrast, a decline in investment is anticipated in the agricultural sector – only slightly more than half of companies plan to invest, the lowest figure since autumn 2014.

Energy costs are currently a burden for almost two-thirds of companies, compared to nearly 88 percent in autumn 2022. High raw material and material costs are now only a problem for one in two companies; in autumn 2022, it was four out of five.

Balance sheet quality deteriorates again

The balance sheet quality of small and medium-sized enterprises (SMEs) deteriorated again in 2023, reaching its lowest level since 2012. The dynamic debt ratio fell by 25,5 points since 2022, impacting companies' ability to repay debt from cash flow. The equity ratio also declined , reaching its weakest level since 2018, although it remains above levels seen in the early 2000s.

Source: BVR

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