Bureaucracy continues to pose major challenges for entrepreneurs in Germany, according to a study by KfW. Another study quantifies the economic damage.
According to KfW, one in three entrepreneurs perceives bureaucratic regulations and obligations as a burden. The next most frequently cited burdens are family commitments (27), order acquisition (26), and the economic and financial risks of self-employment (22 each).
The founders surveyed spend around one-tenth of their working time dealing with administrative obligations. One in two respondents experiencing bureaucratic difficulties complains about the effort required for various registration and filing processes and the complexity of taxation. The severity of the bureaucratic problems differs according to several characteristics: In the construction sector, 43% of founders see administrative hurdles, compared to only 28% in the retail sector. Founders requiring external financing cite bureaucratic problems far more often (45%) than those without (26%). Younger founders experience significantly more problems with bureaucracy than older ones.
“Although there has been progress in reducing bureaucracy in recent years, there is clearly still room for improvement,”
said KfW Chief Economist Dr. Jörg Zeuner. Digitalization, in particular, holds great potential. A consistent expansion of e-government could make administrative processes faster and more efficient.
Up to 50 billion euros in damage per year
A study by the Berlin company Kontist comes to a similar conclusion: The founders surveyed reported losing an average of 24.6 working days each year due to bureaucracy and administration. With approximately 250 working days per year, this corresponds almost exactly to the result of the KfW study.
To illustrate this, the study authors extrapolated the costs of unpaid labor: With an average hourly rate of €59.61 for respondents, they lose €11,735 annually due to administrative costs—assuming they were fully occupied with client projects. For all 4.4 million self-employed people in Germany, this represents a potential loss of earnings of a good €50 billion.
However, Dr. Zeuner from KfW reassures:
“Bureaucracy costs founders time and nerves, but this is why startup projects are rarely abandoned or startup plans left in the drawer.”
According to KfW, the biggest hurdle in the planning phase is financial risk. Existing start-up projects are abandoned primarily due to attractive job alternatives or unsatisfactory profitability, not due to bureaucracy.
