Start-up Activity in Germany - "Ich-AGs" Boosting Start-up Numbers?

In 2003, the number of newly founded firms in Germany grew by eight per cent year-on-year. The main driver behind this surge of start-up activity is the introduction of a business start-up subsidy for employees (the so-called "Ich-AG" allowance) and the heavy use of bridging allowances.

These labour policies will likely have a strong impact on trade firms, customer-related service providers (such as catering businesses and hotels), and the construction industry. These are the findings of the recent ZEW Start-up Report, a biannual examination of firm foundation activities in Germany conducted by the Centre for European Economic Research (ZEW) in Mannheim.

Thus, for the first time since 1999, start-up numbers have stopped dwindling. All sectors have recorded increasing start-up activities. Displaying a start-up growth rate of nine per cent, West Germany clearly outperforms East Germany, which observed a 4.5 per cent growth. The significant quantitative increase in new firms promoted by labour policies caused a visible structural shift towards smaller, neither technology nor knowledge-intensive start-ups in the legal form of a partnership.

The strongest growth in start-up numbers can be observed in the trade sector. This development is largely based on mail-order business marking a 60 per cent increase in start-up activity. In absolute numbers, most new trade businesses were recorded in specialised retail trade of photographic goods and computers.

In 2003, start-up numbers among customer-related service providers rose by about five per cent compared to the previous year. The housing and real estate sector recorded an above average rise in start-up numbers in this context. Founding conditions also seem to have improved in the field of adult education over the past year as indicated by the surging number of newly established businesses in this sector.

Among corporate service providers, the number of new firms increased by about five per cent. Founders were particularly interested in business areas such as data processing services and related activities. The number of manufacturing start-ups has grown by approximately seven per cent. Many areas of the manufacturing industry are highly capital intensive, which is why Ich-AGs are rather rare in this sector, the exception being parts of the construction industry.

Contact

Dr. Georg Metzger, E-mail: metzger@zew.de

Dr. Diana Heger, Phone: +49(0)621/1235-382, E-mail: heger@zew.de

ZEW-Start-up Report, Volume 3, Issue 2, November 2003 (in German language)