Germany is witnessing a notable downturn in business formation and employment rates, particularly impacting small enterprises. Recent statistics indicate a 0.9% decline in company formations, accompanied by a significant drop of over 25% in small business startups. This contraction is paired with a worrying reduction in industrial and construction jobs, totaling a loss of 103,000 positions. While the service sector shows modest growth, overall employment remains stagnant.
The number of business registrations has fallen by 1.0%, totaling 547,500, while deregistrations have seen a slight increase of 0.7%, reaching 443,000. The economic landscape is further challenged by a rise in company insolvencies and growing existential fears among 7.3% of businesses. These concerns are primarily driven by a lack of orders and mounting international competition.
The construction and industrial sectors are notably hard-hit, facing heightened insolvency risks. Meanwhile, the services sector experiences some relief with a slight decrease in existential anxiety. The current economic climate is exacerbated by increased interest rates and a sluggish economy, deterring potential entrepreneurs from venturing into self-employment.
The Ifo Institute reports that sectors like manufacturing and retail are particularly vulnerable, with existential threats affecting 8.6% and 13.8% of firms, respectively. Despite a slight reduction in existential fears within the construction and service sectors, the overall sentiment among businesses remains pessimistic. This challenging environment underscores the urgency for strategic interventions to mitigate the risk of further economic downturn and support business resilience.
