According to the latest ninth edition of the ZEW study commissioned by the Stiftung Mittelstand, Germany only ranks 18th out of the 21 industrialized nations analyzed in the Family Business Country Index (https://www.familienunternehmen.de/de). The study identifies six sub-indices, namely taxes, labor, regulation, financing, infrastructure, investment and energy. The authors of the ZEW study come to the following conclusion: “The findings on Germany’s position give considerable cause for concern.” The German economy is expected to be in recession for the second time in a row in 2024 (Joint Economic Forecast Autumn 2024, p. 3).
These statements do not fit in with the fact that the DAX index has climbed to a record high. However, the DAX does not represent the German corporate landscape, but rather the large companies, most of which operate and produce worldwide. If you want to know how medium-sized companies in Germany are doing, most of which are dependent on German submarkets, it is best to look at the MDAX. And the MDAX has lost ¼ of its value since 2021. The tragedy is that this trend cannot be reversed. The Autumn Report 2024 of the leading economic research institutes comes to the bitter conclusion that Germany can expect no more than slight economic growth in the foreseeable future (Joint Economic Forecast Autumn 2024, p. 34). A recent study by the BDI (BDI 2024) considers 20% of industrial value creation in Germany to be under threat.
According to the ZEW study, companies in Germany are suffering above all from excessive bureaucracy, a high tax burden compared to other countries, high wage and energy costs coupled with a worsening shortage of skilled workers and increasing competition from Chinese companies. Companies that cannot relocate their value creation abroad with cheaper production factors have a hard time in Germany.
In addition, the political framework conditions in Germany are uncertain against a global backdrop that is even unmanageable. Tax and subsidy decisions have a major influence on the use of technologies, socio-political decisions affect the availability of labor, and politically motivated embargoes have an impact on the availability and prices of energy and raw materials. Geopolitical contexts are becoming more complex and are subject to faster and stronger changes.
This swirling potpourri of factors hampering the economy has resulted in the observable and understandable low willingness of German companies to invest and innovate, which further weakens their international competitiveness. The German economy is in a downward spiral. The number of corporate crises will increase.
My recommendation: against the backdrop of the current economic development, free yourself from any notions of growth. Be particularly aware of opportunities, but focus on the maximum business volume that your company can reliably generate now and in the short term, and consistently adapt capacities and structures to this level as long as your company can still afford to restructure. Resilience comes before growth. This strategy may appear to contribute to the downward trend in the German economy, but it is about securing the existence of your company. Conversely, this means that the more companies overcome this difficult phase, the better off the German economy will be.