Germany is suffocating under regulations

12 October 2022, Munich. Germany has slipped further down the list of industrialised nations when it comes to regulation, from 14th to 19th out of 21. Only Spain and the Czech Republic scored worse. The United States, Canada, Ireland and Japan stand at the top of the list.

This is the result of a preliminary calculation included in the Country Index for Family Businesses for the year 2022, which will be published at the beginning of next year. The study has been published regularly since 2006 by the Foundation for Family Businesses and prepared by the ZEW – Leibniz Centre for European Economic Research in Mannheim.

Competitiveness at risk

“These results have to serve as a wake-up call”, says Professor Rainer Kirchdörfer, Chairman of the Foundation for Family Businesses. “In view of the energy costs, family businesses fear for their existence and Germany fears for its competitiveness. Meanwhile, new bureaucratic monsters are constantly being created in Brussels and Berlin. In an era of one crisis after another, we can no longer afford such a regulatory environment.”

The Country Index for Family Businesses uses objectively measurable data to analyse the most important location factors for family businesses. To this end, it focuses on six subject areas: taxes, labour costs/productivity/human capital, financing, infrastructure/institutions, energy and regulation.

The regulation sub-index, in turn, is made up of five equally weighted sub-indicators: labour market and collective bargaining law, foreign trade, business start-ups, regulations affecting ongoing business operations and company co-determination.

Speed is the exception

The data set varies depending on the sub-indicator. For example, the sub-indicator “Regulations affecting ongoing business operations” is based on the indicator system included in the Fraser Institute’s “Economic Freedom of World” study, more precisely on the sub-indicator “Bureaucracy Costs”. It measures the risk of cost increases due to compliance with regulations as well as inefficiency and lack of transparency in the regulatory environment.

Professor Friedrich Heinemann, author of the study and researcher at ZEW Mannheim, says “In some fields, such as the construction of liquefied natural gas infrastructure, we are observing an astonishing speed of approval procedures during the energy crisis. But this is still the big exception. We should use the crisis to fundamentally modernise and speed up processes at government agencies relating to the approval of corporate investments.”

Teaser Picture: Factory under construction © graemenicholson / istock