By Victoria Waldersee
BERLIN (Reuters) – If Germany is to quickly revive its flagging industrial economy, businesses say the country’s new leadership must make drastic reductions to bureaucracy alongside their radical plans to boost public investment.
Ten executives and heads of business associations representing industries from cars to energy to shipping said in interviews with Reuters that the cost and complexity of red tape in Germany was draining resources which could otherwise be invested in modernising their businesses.
Take Ulrich Flatken, head of Mecanindus Vogelsang, a 450-employee company producing cylindrical fasteners for carmakers and other industrial clients.
Flatken abandoned plans to automate part of his storage facility when he realised that the cost of meeting updated fire regulations for new equipment was so high that he would lose money on the investment.
“I’m not saying I’m a fan of what they’re doing in Argentina or the U.S. – that’s clearly too drastic,” said Flatken, referring to the sweeping cuts to federal bureaucracy underway in both countries. “But I understand the sentiment… It really bothers me to keep filling out forms without believing that it will achieve anything.”
Calls by executives for the European Union to loosen and simplify its regulatory framework have grown louder in recent months as businesses grapple with how to compete in the face of an increasingly closed off U.S. market and Chinese firms expanding abroad.
In Germany, top bankers warned last week that to have full effect, the nation’s giant spending plans for infrastructure and defence need to be accompanied by a slashing of red tape.
The regulatory burden was also holding back innovation in Europe’s biggest economy, said Christian Vietmeyer, head of steel and metal association WSM, which represents 5,000 German companies.
In February, the European Commission proposed easing some sustainability reporting rules and has pledged to cut reporting obligations by 25%, rising to 35% for smaller firms, by 2029 – equivalent to a 37.5-billion-euro ($40 billion) reduction in administrative costs.
The conservative CDU party, which won the most votes in Germany’s recent election and is in talks to form a coalition, put cutting red tape in second place on its 15-point list of policy priorities.
But on the ground, executives struggle to trust such promises, fearing governments will simply add new requirements.
Indeed, a World Economic Forum survey of companies in 2023 showed Germany was just one of three countries in the EU where it had become more complex over the previous four years to comply with government regulation.
A 2024 index by German economic institute Ifo measuring the cost of tasks like obtaining permits, filing tax returns, and trading goods found that while other European and OECD countries had eased the burden in recent years, Germany had not: its bureaucracy score has stagnated since 2006.
Adidas CEO Bjorn Gulden said regulatory requirements had gone too far.
“Our ESG reports are 245 pages… We’re spending far too much time documenting instead of doing,” Gulden said in February. “Bureaucracy stops business.”
“INSPECTORS FOR EVERYTHING AND NOTHING”
Executives can also be risk-averse, said Gerd Roeders, owner of an aluminium foundry in Lower Saxony.
Roeders’ company, which employs 168 people, is legally required to have a qualified ladder inspector check his ladders every year for safety and file a report, supported by the original documentation on the ladder’s specifications.
Such systems, while laborious, also protect executives if something goes wrong, Roeders said.
“We could get rid of the ladder inspector, the inspection seal, the documentation, and just make business owners responsible. But that requires a different way of thinking in society,” Roeders said.
“I have so many of these inspectors, for everything and nothing. That’s bureaucracy… but it protects me too.”
Germany has passed numerous bureaucracy alleviation laws, including one taking effect this year which it promises will save 944 million euros through measures like digitalising tax notices and reducing the length of time businesses must keep receipts to eight years from ten.
The CDU’s manifesto proposed annual laws to reduce reporting requirements and freeing small and medium-sized firms from the obligation to appoint inspectors.
It also wants to scrap Germany’s supply chain law, which requires companies with over a thousand staff to report on how they are preventing human rights and environmental risks in their supply chain. This regulation often ends up falling to their smaller suppliers to explain, and duplicates a similar EU-wide law.
Germany’s Greens and Social Democrats, as well as NGOs, have expressed concern that loosening such reporting requirements will reduce corporate accountability and reverse hard-fought gains in sustainability.
But businesses say a simpler system is sorely needed.
“We haven’t found anything out that we didn’t already know,” said Philip Roehrig, COO of auto sector supplier ABICOR Group, whose bigger clients are subject to the supply chain law and give his company long forms to fill out.
“The added value for me is zero.”
($1 = 0.9352 euros)
(Reporting by Victoria Waldersee; additional reporting by Ilona Wissenbach, Elke Ahlswede, Christina Amann, Tom Kaeckenhoff, Maria Martinez and Helen Reid; Editing by Toby Chopra)
