Bureaucracy Emerges as Germany’s Biggest Business Location Problem, Ifo Survey Finds
Berlin, September 21, 2026: Bureaucracy and regulation have emerged as the most frequently cited problem affecting Germany’s attractiveness as a business location, according to a new special analysis of the ifo Business Survey.
Around 50% of companies surveyed identified bureaucracy and regulatory requirements as a major problem for Germany’s business location. Energy costs ranked second at 27%, followed by labour costs at 22%. The results were published by the Munich-based ifo Institute on September 21, 2026.
Administrative Burden Outpaces Other Business Concerns
The survey indicates that administrative and regulatory requirements are being viewed by businesses as a broader location challenge than several other cost pressures.
According to Klaus Wohlrabe, Head of Surveys at the ifo Institute, bureaucracy can affect companies in two ways: it consumes employees’ time that could otherwise be used for productive activities, while approval and documentation requirements can also make some planned investments financially unattractive.
The findings therefore extend beyond the direct cost of completing forms or meeting reporting obligations. For businesses, delays in approvals and additional compliance requirements can also influence decisions about whether and when to undertake new projects.
Larger Companies Report Greater Pressure
The perceived burden increases significantly with company size.
Among large companies, 59% identified bureaucracy and regulation as a location problem, while the figure was 58% among medium-sized businesses. Among small companies, the share stood at 50%.
The proportion was lower among micro-enterprises with fewer than 10 employees, at 41%, and among solo self-employed people, at 33%.
One explanation is that larger companies generally operate across more regulatory areas. Businesses with employees, industrial facilities or international operations can face requirements covering employment law, reporting, documentation, data protection and other areas.
Energy Costs Remain a Major Industrial Concern
Although bureaucracy ranked first across the overall survey, the picture differs considerably between sectors.
Energy costs were identified as a particularly significant concern within Germany’s industrial sector. 39% of industrial companies cited energy costs as a location problem, compared with 17% of service-sector companies.
This highlights the different pressures faced by Germany’s major economic sectors. Manufacturing companies remain more exposed to electricity and other energy costs, while service businesses tend to face a different combination of operating and labour-market challenges.
Construction Faces Skills and Approval Challenges
The construction sector also reported a distinct set of concerns.
Around 29% of construction companies identified a shortage of skilled workers as a business-location problem, while 13% pointed to lengthy approval procedures.
For construction companies, delays in permits can affect project timelines, while shortages of qualified workers can create additional constraints on the industry’s ability to execute projects.
Weak Demand Challenges the Retail Sector
The survey also shows that economic conditions remain important for Germany’s trading businesses.
Around 25% of companies in the retail sector cited the general economic and order situation as a major problem. This indicates that businesses are dealing not only with structural issues such as regulation and labour costs, but also with demand-related challenges.
The results demonstrate that Germany’s business environment is not defined by a single problem. Different industries experience different combinations of regulatory, cost, labour and demand pressures.
Planning Certainty Remains Important for Smaller Businesses
Solo self-employed workers reported somewhat different concerns. 21% cited uncertainty and a lack of planning certainty, while 17% identified taxes and social contributions as important problems.
Across all businesses surveyed, other concerns included the shortage of skilled workers at 17%, political framework conditions at 16%, and taxes and social contributions and lack of planning certainty at 13% each.
Because respondents could identify multiple problems, the percentages are not intended to add up to 100%.
Digitalisation Could Help Reduce Administrative Work
The latest findings also connect with previous research by the ifo Institute on bureaucracy.
An earlier ifo company survey found that businesses viewed bureaucracy negatively and estimated that employees spent a significant share of their working time on administrative tasks. Companies surveyed in that research supported simplifying regulations and increasing the digitalisation of administrative processes.
For German businesses, digital government services could therefore play an important role in reducing repetitive documentation, improving communication with authorities and shortening administrative processes.
A Continuing Competitiveness Debate
The latest survey adds to a broader discussion about Germany’s competitiveness and the conditions required for companies to invest and expand.
Germany remains one of Europe’s major industrial economies, but companies are simultaneously navigating energy costs, labour shortages, international competition, regulatory requirements and changing demand.
The ifo findings suggest that reducing administrative complexity is one area businesses are highlighting when discussing the country’s attractiveness as a location for investment.
The survey does not mean that every company experiences bureaucracy in the same way. The differences by company size and sector demonstrate that business challenges vary considerably across Germany’s economy.
Business Environment in Focus
The findings place bureaucracy, regulation and administrative efficiency firmly among the central issues in Germany’s current business debate.
For policymakers and companies, the challenge is increasingly about balancing necessary regulation with processes that allow businesses to invest, innovate and operate efficiently.
As Germany seeks to strengthen investment and economic growth, the latest ifo survey provides a clear indication of the issues companies themselves are identifying as obstacles to doing business.
