One in Two Companies Views Bureaucracy as the Biggest Location-Related Problem

Half of German companies cite bureaucracy and regulation as the biggest problem facing Germany as a business location. According to the ifo Business Survey, energy costs (27%) and labor costs (22%) lag well behind. “Red tape has a dual impact: It ties up staff who are needed elsewhere, and it hampers investments, since they no longer make financial sense once the costs of approval and documentation are factored in,” says Klaus Wohlrabe, Head of Surveys at ifo. “The second effect is more costly and it doesn’t show up in any statistics because the project never gets off the ground.”

The solo self-employed (33%) are the least likely to cite bureaucracy as a problem, followed by microenterprises with fewer than ten employees (41%). The differences between large (59%), medium-sized (58%), and small companies (50%) are small. “Any company that has employees, operates plants and facilities, and exports goods is subject to several sets of regulations simultaneously – from labor law to reporting obligations to data protection,” says Wohlrabe. “The self-employed and microenterprises are still exempt from many of these obligations. As soon as a business reaches a certain size, almost all of them apply at once.”

There are significant differences across sectors of the economy. In manufacturing, 39% cite energy costs as a location-related problem, compared with just 17% in the service sector. Companies in the construction sector point to a shortage of skilled workers (29%) and lengthy approval processes (13%) more often than average. In trade, weak demand is the main concern: 25% cite the general economic and order situation, more than in any other sector.

The self-employed have different priorities than companies with employees. They cite uncertainty and a lack of predictability (21%) as well as taxes and levies (17%) far more often, but hardly ever mention labor costs or a shortage of skilled workers.

Other issues frequently cited by all companies include the shortage of skilled workers (17%), the political environment (16%), taxes and levies (13%), and a lack of planning certainty (13%).

The data comes from a special question in the July 2026 ifo Business Survey. The companies were asked: “What are currently the biggest problems facing your company in Germany as a business location?” The responses took the form of free text without predefined categories. A total of 4,449 responses from the manufacturing, construction, trade, and service sectors were analyzed and assigned to set subject areas. Since multiple responses were allowed, the figures add up to more than 100%. The percentages refer to the companies that answered the open-ended question.