SMEs under Pressure
Public Events“First-Hand Information on Economic Policy” Lecture in Stuttgart on Businesses under Transformation
German businesses are stuck in crisis mode. Whether it’s the skilled labour shortage, climate neutrality, personal data privacy or supply chain legislation – if businesses want to succeed, they need to invest more than ever before. Small and medium-sized businesses (SMEs), the backbone of the economy, face the most pressure. On 27 June 2023 at BW Bank in Stuttgart, Baden-Württemberg’s Minister for Economic Affairs Dr. Nicole Hoffmeister-Kraut spoke at the lecture series “First-Hand Information on Economic Policy,” where she explained that, in order for SMEs to overcome these challenges, policy must be designed to support them, not hold them back. Two entrepreneurs from Baden-Württemberg explained how that might look in practice.
“In business location rankings, Germany has slipped down to 18th place out of 21. The question is: do businesses still see Germany as an attractive location for investment? Our studies show that the incentive to invest in Germany as a business location is declining,” summarised ZEW President Professor Achim Wambach the status quo in his keynote speech. But there is also good news. “Deglobalisation is not on the horizon. Our dependency on Russia and China can be reduced in the long run without suffering any loss of prosperity. Diversification is the name of the game.”
German economy in crisis
“Our company is barely able to manage bureaucratic behemoths like the Supply Chain Act or the Buildings Energy Act. German industry needs different solutions,” said Dr. Klaus Geißdörfer (CEO of EBM Papst, Mulfingen). According to Geißdörfer, this multitude of transformation processes and regulations are too costly and not realistically achievable for many SMEs. His plea: “We need to figure out how to deal with these laws that are stunting our growth and obstructing research from ever making it into functional business models.”
Dr. Gitte Neubauer (CEO and VP of Omics Sciences in Heidelberg) discussed how Germany’s bureaucracy and personal data privacy laws make the country an unfavourable location choice for businesses. “There is a lack of skilled workers and innovative start-ups. In the realm of pharmaceutical research, other locations are considerably more attractive. In this country, personal data protection is too powerful, which prevents data from being used effectively in research,” she warned. To keep up with international competition, Neubauer believes that Germany needs to retain its business appeal. “We need to do everything necessary to make sure that our key industries don’t leave for other countries. We need to make Germany more attractive as a business location.”
Where politics reaches its limits
“We are experiencing a technical recession. A gradual decline is occurring in core industries. The problems have been observed. Now is the time to tackle them,” stated Minister Hoffmeister-Kraut. In her opinion, businesses need to be supported by the state if they are to survive the current crises. At the same time, she pointed to challenges for society as a whole. “We need to become less susceptible to crises. We have to take the chances that new technologies and digitalisation give us and use them to our benefit. This will create new growth and the challenges of climate change will be easier to conquer.”
“With respect to education, retirement, and public authorities, Germany has to switch into a new gear. There needs to be a new societal consensus and political will to accelerate change,” determined Hoffmeister-Kraut. She also highlighted that, as a business location, Germany has some catching up to do when it comes to energy supply. “We need to attack the topic of energy supply without getting tangled up in ideologies and make sure that we have enough affordable energy to power our industries. The current regulation frenzy is not the answer. Businesses require more freedom to pursue their ideas,” Hoffmeister-Kraut concluded.
