German Industry Sees Country’s Competitiveness Under Threat

(Bloomberg) -- Germany’s industry lobby is urging the next government to slash bureaucracy, accelerate approval processes, and lower electricity costs to stop the country’s declining competitiveness. 

Nearly 90% see the country’s economic policy as increasingly unreliable, with more than two-thirds reporting a significant decline in their trust over the past four years, according to a survey of 4,000 companies conducted by the German Chamber of Industry and Commerce, known as DIHK. 

“For companies, Germany as a business location is currently only partially competitive,” DIHK President Peter Adrian said two days after national elections. “The new government must address this as a matter of urgency. A lot of trust has been destroyed in the past.”

Easing the regulatory burden is a top priority, with 95% of businesses calling for a drastic reduction in bureaucratic hurdles. Adrian called on politicians to “declare war” on bureaucracy, suggesting that for every new rule, at least two — preferably three — should be scrapped.

“We need a recovery law that encourages people to get started and consistently removes all stumbling blocks: Burdens that have already been planned or even decided upon must be stopped immediately,” Adrian said. 

Faster approval processes are also seen as critical, with 70% of companies urging immediate action. While a federal and state “acceleration pact” was passed in 2023, businesses say it must now be turned into law and practice. 

Expedited approvals for LNG terminals and wind power projects have shown that faster processes are possible, according to Adrian, who argued that these exceptions should become the standard.

Lowering costs remains a key issue, with 63% of businesses wanting social security contributions capped and 60% calling for corporate tax reform. German companies pay higher taxes than most European Union and industrialized nations. 

More than half demand lower electricity costs, a figure that rises to nearly two-thirds in the industrial sector. Two-thirds of companies also said that the energy transition is driving up operational expenses and hurting competitiveness.

Rising global protectionism is adding pressure as no major economy is as deeply integrated into world trade as Germany, DIHK Managin Director Helena Melnikov said. About 81% of businesses want the government to push harder for new EU trade agreements and prevent regulatory overreach from Brussels.

The DIHK suggested that the next government adopt a five-point growth strategy with concrete steps for the first 100 days. Business leaders, it said, are ready to invest and expand but need political support, not additional obstacles.

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