Only Slight Rebound in Start-Ups in non-Research-Intensive Sectors
Research
11.02.2025
ZEW Study Shows Ongoing Low Start-Up Momentum
Despite a slight increase of 1.3 per cent in 2023 compared to the previous year, the number of start-ups in Germany remains low. These are the findings of a recent study by ZEW Mannheim based on the Mannheim Enterprise Panel (MUP). High energy costs, a shortage of skilled labour and increasing bureaucratic hurdles are putting the brakes on entrepreneurial spirit, even in research and technology-intensive sectors in Germany.
“There is no sign of a trend reversal. We have been observing a continuous decline in start-ups in Germany for years; their number has fallen drastically compared to the 1990s. The slump in start-ups in research and technology-intensive sectors is particularly worrying. The threat of innovation gaps looms large there, which could also affect other sectors of the German economy in the long term,” explains Dr. Sandra Gottschalk, researcher in ZEW’s “Economics of Innovation and Industrial Dynamics” Research Unit. “In particular, the high cost pressure caused by inflation and rising wages as well as the sluggish digitalisation of administrative processes make it difficult for new companies to enter the market.”
Reforms urgently needed
The study shows that fewer and fewer companies are being founded, particularly in research-intensive industries such as mechanical engineering, electrical engineering and chemicals. The number of start-ups in the research-intensive manufacturing sector has more than halved since 2002. The number of new businesses in energy-intensive manufacturing – such as the metal products industry – has also fallen by more than ten per cent per year in the last two years.
“Fewer start-ups mean less competition, less investment and less favourable prospects for the German economy. Politicians need to counteract this by taking measures to make launching a new business more attractive,” says Professor Hanna Hottenrott, head of the “Economics of Innovation and Industrial Dynamics” unit.
High bureaucratic burden inhibits start-ups
A fundamental obstacle is the high bureaucratic burden. According to the IAB/ZEW Start-up Panel, young companies spend an average of nine hours per week on administrative tasks, including data protection requirements and reporting obligations. Start-ups in the construction industry are particularly affected, as statutory documentation requirements take up an above-average amount of time. According to the panel, 44 per cent of start-ups state that they have less time for research and development because of these administrative burdens. “We must urgently act to take advantage of the opportunities offered by digitalisation, thereby reducing the time spent on applications and reporting obligations,” says Hottenrott.
