If you're looking to expand your company internationally, one of the very best markets to start a business is Germany.
What Makes Germany Such an Attractive Market?
Perhaps the most important reason for considering setting up a company in Germany is that it's ranked the number one market in Europe, and number four worldwide. There are over 45,000 foreign companies already established here, accounting for a workforce of around 3 million, which equates to 25% of jobs functioning in the export sector.
International Finance Corporation Findings
Germany scores so highly as a country for doing business because of a number of factors. The IFC states the following world rankings out of 190 countries for various aspects of operating as a business in Germany:
Ease of doing business: 17th
Ease of starting a business: 114th
Ease of dealing with construction permits: 12th
Ease of accessing electricity: 5th
Ease of registering property: 79th
Ease of obtaining credit: 32nd
Ease of protecting minority investors: 53th
Ease of paying taxes: 48th
Ease of trading across borders: 38th
Ease of enforcing contracts: 17th
Ease of resolving insolvency: 3rd
It's immediately obvious that for all but one factor, Germany ranks at least in the top 50% of countries and for several aspects, in the top 25%.
But one particular ranking stands out rather starkly: the ease of starting a business. Germany ranks 114 out of 190. This makes it clear that although operating in Germany, and even navigating some of the necessary steps in getting established are relatively easy, the actual process of starting up in the country is not easy at all.
So let's unpack this a little.
Demographic Challenges in Germany
The German population is around 82,15m people. After a continues decline from 2003, the population grows from 2011 onwards. Main reason is the high number of international migrants to Germany.
But based on certain assumptions regarding the birth rate, life expectancy and net immigration, the Federal Statistical Office predicts that, by 2060, Germany's population will shrink by up to 20% from today's figure.
Despite the growing numbers of migrants, immigration can`t resolve the fundamental challenges in the demographic process in Germany.
The trend in Germany regarding demographic is clear and we look at the implications it will have for doing business in Germany.
We estimate the gross domestic product will decrease because the total number of hours will decrease. While less people will work the GDP will go down.
The German government is looking currently to counteract this trend while looking to increase the labour force participation. In Germany we are looking at elderly and people with family commitments. E.g. a decision was made some few years ago to gradually raise the retirement age to 67 to keep also the knowhow in the labour market.
In some areas and industries, we see already a shortage in skilled workers which can`t be filled with appropriate personal. Although encouraging immigration of skilled workers is a useful policy, we think it can`t stop or even reverse the demographic trend. We hopefully can use the current situation to skill migrants and keep them in Germany.
Many reports suggest that that productivity drops as the labour force ages. In recent studies in this area came to the conclusion, that the level of productivity remains largely the same. A business owner said once: “the young can run faster but the old know the shortcuts.”
Many companies are forced to aggregate productivity through higher competition and stronger technological progress. We see many companies working in this area quite hard.
Germany remains a country with high innovation and technical progress. Qualification and education will remain very strong and the basis to keep German companies competitive. Also in an ageing society, each individual must retain flexible and open to new ideas, which most German do. The dual system in Germany will give young adults room to develop their talents and with free universities, Germany makes sure that skilled workforce will still be trained. Still we believe more public funding should be put on education for infants and school kids.
Despite those challenges, there is still a big economic potential in German with one of the highest with GDP per Capita is equivalent to 358 percent of the world's average reaching an all-time high of 45269.79 USD in 2015. Germany remains the biggest market in the EU and with Britain leaving the EU, a pillar to enter the EU.