German firms face rising bureaucracy costs in Germany; to around 7% of turnover

German firms face rising bureaucracy costs in Germany; to around 7% of turnover

Bureaucratic burdens in Germany’s corporate sector: causes and effectsMonthly Report – July 2026

DE Monatsbericht – Juli 2026 EN Monthly Report – July 2026

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Bureaucratic burdens in Germany’s corporate sector: causes and effects

1 Regulation has important functions, but also entails a bureaucratic burden

2 Bureaucracy is a significant cost factor for enterprises

3 Areas with increased compliance costs

4 Regulatory burden by international standards

5 Potential synergies with other areas for reform

Supplementary information: The empirical relationship between bureaucracy costs and other location factors

6 The impact of increased bureaucracy on firms’ investment, competitiveness and productivity

Supplementary information: The empirical relationship between bureaucracy costs and the productivity of German enterprises

Numerous surveys show that bureaucracy at firms in Germany has become more and more of a burden over the past few years. Less well known, however, is why this is happening, how significant this burden is and how it is affecting firms. A Bundesbank Online Panel – Firms ( BOP‑F ) survey provides new insights into this.

The survey quantifies the rising costs of regulatory requirements (bureaucracy costs) for German firms in recent years. On average, bureaucracy costs increased between 2022 and 2024 from around 5 % to around 7 % of annual turnover. According to econometric estimates, the increased regulatory burden markedly slowed productivity developments in the corporate sector. The results suggest that, particularly in the case of smaller firms, bureaucracy diverts some workforce resources away from revenue-generating activities.

In addition to quantifiable bureaucracy costs, the survey also qualitatively calculates the bureaucratic burdens in individual areas. Firms reported the largest and fastest growing amount of red tape in (i) tax and financial reporting, (ii) data protection and privacy regulations, (iii) employment and labour law regulations and (iv) environmental regulations. Bureaucracy costs rose significantly in all sectors. In the financial industry, bureaucracy costs as a share of turnover continued to rise sharply from a high level. They also grew strongly in the manufacturing sector.

This broad-based increase could be related to the fact that some new regulations are interfering quite significantly with fundamental business processes. Although some of these requirements may mainly result in temporary transition costs, international surveys show that bureaucratic regulations in Germany place a particularly heavy burden on firms, by European standards. One possible contributor to this is the fact that companies and public administrations in Germany are lagging behind their international peers in terms of digitalisation, making it more difficult to implement new regulatory requirements. Furthermore, the analysis suggests that the structural challenges that are particularly pronounced in Germany, such as the skills shortage and increased competitive pressure, have further exacerbated the burdening impact of regulatory requirements. In view of the Federal Government’s ongoing reform efforts, synergies could therefore arise from the fact that, alongside the reduction in bureaucracy, progress is being made in digitalisation and structural reforms are underway. These synergies might not only directly strengthen economic growth, but also reduce the burdening effect of existing regulation.

The survey does not allow any conclusions to be drawn about whether the regulations behind the reported bureaucratic burdens are appropriate. Overall, however, it does show that reducing bureaucracy could significantly ease the burden on firms. Politicians have recognised this need for action and are on the right track with the modernisation projects that they have launched. Now it is a matter of implementing these measures swiftly and comprehensively.

Regulatory requirements fulfil important societal functions. They limit market failures and protect, for example, the environment, health and consumer interests. In addition, they support key transformation processes, such as the transition to a climate-neutral economy. Experience from the financial crisis also shows that inadequate regulation can entail considerable risks. At the same time, however, regulations can unduly hamper economic activity – for instance, if regulatory density is very high, compliance is unnecessarily difficult or regulations are poorly aligned. It is impossible to determine exactly when regulation devolves into an undue burden. It is crucial to strike a balance between reaping societal benefits and putting the lowest possible burden on firms, households and public administration.

The bureaucratic burdens on firms in Germany have risen significantly in recent years. This is demonstrated by surveys conducted by various institutions. Representative Bundesbank surveys show that, since 2022, more and more firms have cited bureaucracy as a pressing problem. This figure was just under 70 % at last report, compared with 45 % in 2022. Government requirements are thus now posing problems for more firms than the skills shortage or high production and labour costs. The European Investment Bank regularly surveys firms about barriers to investment. Since 2022, the results of these surveys have shown that regulatory requirements are increasingly stalling investment in Germany. Data from the National Regulatory Control Council support this finding: they show that the burden of meeting these requirements has risen significantly since 2022, especially for businesses. 1

Studies suggest that government regulations in Germany result in considerable macroeconomic costs. 2 According to the German Council of Economic Experts (2025), the costs generated by information obligations in Germany amounted to €193 billion in 2024. An IAB study reports that, between 2022 and 2025, one in every ten enterprises hired additional staff to comply with legal and documentation requirements. 3 Firms in the KfW SME Panel also report that the SME workforce spend on average 7 % of their working hours on administrative processes in order to fulfil government requirements. 4

The present analysis examines the extent and causes of growing regulatory burdens as well as their impact on firms. To this end, around 7,000 firms were surveyed in the third quarter of 2025 as part of the Bundesbank Online Panel – Firms ( BOP‑F ). 5 The responses give an indication of the areas in which bureaucratic burdens have increased especially strongly, and which firms are particularly affected. This allows for more detailed insights into the origins and distribution of bureaucratic burdens. The survey responses also provide information on the cost increases associated with the additional burdens. This information can be used to draw conclusions about the causes and extent of increased bureaucracy costs.

The survey used here captures the compliance costs that arise for firms as a result of complying with government regulations. 6 This comprises documentation, retention and information obligations as well as reporting and evidence requirements. The interpretation and application of laws as well as application, planning and approval procedures are also included here. Direct costs arising from government regulations, such as minimum wage policies or carbon pricing, are not taken into account, however. Compliance costs include the necessary spending on staffing, material and services. Investments that firms have to make as a result of new requirements are also considered. In the following, the terms “compliance costs” and “bureaucracy costs” are used largely interchangeably.

The survey results do not allow any conclusions to be drawn as to whether the recorded bureaucratic burdens are due to excessive regulation. The survey itself captures the expenditure associated with government requirements. It is not possible to derive any statements about their societal benefits or about whether or not they are necessary.

As bureaucracy costs are difficult to measure, surveys of firms can offer valuable information. They provide a direct insight into the costs borne by firms. In the BOP‑F survey, firms were asked to report the costs they incurred due to government requirements for 2022 and 2024 as a share of their respective annual turnover. However, the quantitative data are subject to a number of uncertainties. For example, they may be skewed by simplified estimates, different interpretations of terms or subjective assessments. Current events or heightened public attention may also influence respondents’ perceptions of individual burdens.

Since 2022, bureaucracy costs in relation to firms’ annual turnover have risen considerably on average. While bureaucracy costs accounted for around 5 % of turnover on average in 2022, this figure rose to approximately 7 % in 2024. This represents an increase of almost 50 %.

For small enterprises, bureaucracy costs relative to turnover are particularly high. 7 Although smaller firms are exempt from some regulations or are subject to simplified rules, 8 the government regulations that do apply to them often entail comparatively high costs. One likely reason for this is that the effort involved in fulfilling requirements and documenting obligations is often independent of firm size. Smaller firms are thus disproportionately hard-hit by such fixed costs. 9 In the lower turnover size classes, therefore, the ratio of even moderate fixed compliance costs to turnover is fairly unfavourable.

Bureaucracy costs have risen in relation to turnover across all firm size categories in recent years. For small enterprises, the ratio rose by slightly less than one-half on average, comparable to the average across all firms. The increase was above average for medium-sized enterprises and smaller for large enterprises.

Bureaucracy costs have risen significantly in all sectors. 10 The financial sector recorded particularly significant increases. It thus remains the sector with the highest bureaucracy costs in relation to turnover. This is likely to be related, amongst other things, to the extensive reporting requirements of financial corporations, which have been amended again in recent years. Although, in the manufacturing sector, the level of bureaucracy costs in relation to turnover has remained comparatively low, this level has risen by more than one-half over the past few years. Growth was thus stronger here than in the other sectors. As manufacturing firms are particularly competitive internationally, this could have weighed on the competitiveness of the German export industry. 11

The considerable and broad-based increase in bureaucracy costs across economic sectors and size categories could be related to the fact that some new regulations are interfering quite significantly with fundamental business processes. As a result, even a few additional regulations could lead to high implementation costs. These may include requirements for digital processes (such as outlay for the implementation of electronic invoicing for VAT ), for IT security (such as the Network and Information Security Directive ( NIS2 ) 12 or the Digital Operational Resilience Act ( DORA ) 13 ) and for sustainability reporting (such as the Corporate Sustainability Reporting Directive ( CSRD ) 14 or the Supply Chain Act ( Lieferkettensorgfaltspflichtengesetz ) 15 ). These requirements often make adjustments to IT systems, internal control processes and firm-wide documentation and reporting obligations necessary. 16

Taken in isolation, the requirements pursue understandable objectives. To some extent, they address firms’ existing catch-up needs or changed e