The bureaucratic burden on businesses in Germany has reached such a level in recent years that it not only slows down processes but is also increasingly jeopardizing competitiveness. Studies by the German Economic Institute (IW) and the Institute for SME Research (IfM) in Bonn clearly show that there is a great need for action.

A significant increase in the bureaucratic burden

A representative survey of companies conducted by the IW in the fall of 2025 highlights this trend: About 80 percent of companies report an increase in the workload associated with statutory reporting and documentation requirements. More than half of those surveyed even cite a significant increase.

In contrast, there are hardly any positive developments:

  • Only 1.5 percent of companies report a reduction in their workload
  • Just under 20 percent see no change

Small and medium-sized businesses are particularly hard hit

A study by the Institute for Small and Medium-Sized Enterprise Research (IfM) in Bonn on the machinery and plant engineering sector shows just how severe the impacts actually are—especially for small businesses.

According to the report, the bureaucratic burden on SMEs averages 2.18 million euros annually, or about 6.3 percent of revenue.

By way of comparison: The average gross profit margin is about 5.5 percent. This means that administrative costs exceed profits.

This burden is equivalent to the personnel costs of about 34 full-time positions—resources that could be invested in innovation, growth, or skilled workers.

Larger companies are also affected, albeit to a lesser extent in percentage terms: for them, the burden amounts to about 1.3 to 1.6 percent of revenue.

Where does bureaucracy come from?

EU FlagsThe analysis shows a clear breakdown of the causes:

  • 66 percent of the requirements are derived from federal laws
  • About one-third is attributable to EU regulations
  • At less than 6 percent, states and municipalities play a minor role

In total, companies must comply with approximately 3,900 individual requirements.

The areas subject to particularly strict regulation include climate and environmental protection, as well as finance, taxation, and customs.

Bureaucracy Holds Back Innovation and Growth

The consequences go far beyond mere costs. Companies are increasingly having to divert highly qualified specialists from productive areas in order to meet regulatory requirements.

This has several consequences:

  • Innovation projects are being delayed or halted
  • Processes are slowing down
  • Skilled workers are being deployed inefficiently

Especially in the face of international competition and the shortage of skilled workers, this is a significant disadvantage for Germany as a business location.

Bureaucracy as a Structural Problem

GFL Business Profile: Marcus Sarafin, Managing DirectorGFL Managing Director Marcus Sarafin also views the situation with growing concern from the perspective of a small-to-medium-sized business: “Germany and Europe are caught in a bureaucratic trap. Politicians are using their parliamentary powers to regulate virtually every issue down to the last detail. The result is a constant stream of new laws and regulations.”

Moreover, the problem is not just the volume, but also the complexity: “The applications are often pages long, frequently contain completely unnecessary questions, and are made available exclusively as paper documents.”

Sarafin does not believe that the administration and politicians will reduce bureaucracy: “The problem is that the administrative and political apparatus has a vested interest in its own existence. What politician wouldn’t want to assert their own ego through regulations? And what government employee would want to make proposals that could cost them their job?”