For the first time in five years, start-up activity in Germany has increased again. This is according to the KfW Start-up Monitor for 2019. The outlook for 2020 was also positive, but the coronavirus crisis changed this.
Last year, there were a total of 605,000 new businesses founded—58,000, or 11 percent, more than in 2018. The number of part-time start-ups rose by 85,000 to 377,000, while the number of full-time start-ups fell by 27,000 to 228,000, reaching a new low. Unlike in the previous year, the economic growth effect more than offset both the pull of the labor market and the negative trend that has persisted since 2014, according to KfW. The start-up rate, i.e., the proportion of founders among the population aged 18-64, thus rose slightly to 1.2 percent (2018: 1.1 percent).
This positive development had already been announced in 2018: While the number of new businesses started fell by around 17.11 percent between 2016 and 2017, the decline in 2018 was only 2 percentKfW attributed this significant slowdown in the negative trend to the positive overall economic development in 2018. At the same time, the number of start-up plans continued to increase in 2018, which was then reflected in the figures for 2019. The data for 2019 suggest a further increase in start-up plans, which would be a positive signal for start-up activity in 2020.
What impact is the Corona crisis having?
"Start-up activity in Germany increased in 2019 for the first time in five years. For 2020, it remains to be seen whether, given the major concerns posed by the coronavirus crisis, especially for the self-employed, an increase in emergency start-ups or a decrease due to the abandonment of start-up plans will prevail,"
says Fritzi Köhler-Geib, Chief Economist of KfW. Due to the effects of the Corona pandemic in Germany, the KfWthat the number of emergency start-ups will increase this year, similar to the trend during the financial crisis. However, given the existential threat facing many self-employed people due to the current crisis, significantly more start-up plans will likely be abandoned than usual. However, it remains to be seen which effect will ultimately prevail. Köhler-Geib further explains:
"Government liquidity aid and support for short-time work are helping companies and the self-employed for the time being. It is also encouraging to see how many self-employed people are reinventing themselves in times of need and adapting their business models to the acute challenges. However, it is crucial that everyone contributes to keeping the current state of emergency as short as possible through their behavior; then even more will survive this crisis."
About the Start-up Monitor
The KfW Start-up Monitor is a representative population survey on start-up activity in Germany, conducted annually since 2000. Approximately 50,000 people residing in the Federal Republic of Germany who are "start-up-relevant" (aged 18 to 64) are interviewed by telephone. The full report with all results on start-up activity in 2019 is still pending.
