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External publications Study shows for the first time individual bureaucratic burdens in mechanical and plant engineering

Bureaucratic obligations have become a considerable burden for industrial SMEs, which also threatens to slow down investments. And the great amount of demands put upon companies continues to grow.  A recent study by IfM – the „Institut für Mittelstandsforschung“ in Bonn – commissioned by the IMPULS Foundation of the VDMA, already named 375 different regulations at the German federal level companies have to deal with. The burden however is about twice as high because in practice there are more legal requirements at state and municipal level as well as at EU level. And further extensive direct and indirect burdens are coming from Brussels with regulatory projects such as the EU Taxonomy, the European Supply Chain Act or the CSR Directive.

Bureaucratic costs as high as research expenditure

In the study "Bureaucratic costs of companies in the mechanical and plant engineering sector", the burdens are for the first time analysed in detail in three companies of different sizes (from 125 to 3,500 employees). In the case of the small company, this scientific in-depth section yielded the result that around three percent of turnover is tied up annually by the fulfillment of direct bureaucratic obligations. With a turnover of 23.5 million, this amounts to about 705,000 euros – which equals the employment costs of ten full-time employees. This means that the bureaucratic costs – triggered by the federal government alone – are similar to the annual research expenditures of a medium-sized company in the mechanical and plant engineering sector and nearly as high as the average gross profit in the industry. If even more bureaucratic burdens are added, there is a threat of a further reduction in margins and thus also a weakening of investments.
In the case of the larger company with a yearly turnover of 239.5 million euros and two operational sites investigated, the costs for the direct bureaucratic effort of the regulations at the federal level are one per cent (2.48 million euros). At the same time, this equals the costs of employing 40 full-time staff.

„The cost burden is higher for smaller companies, as their fixed costs are spread over lower production volumes. A special focus of policy should therefore be on reducing bureaucracy in SMEs. Indirect costs must also be taken into account: For example, small and medium-sized enterprises are not formally affected by the recently enacted Supply Chain Act. However, many of them have to provide their large customers with data and information so that they can comply with their new obligations. The necessary data collection, processing and communication is already creating additional bureaucratic burdens for SMEs,“ reports Prof. Dr. Friederike Welter, President of IfM Bonn and Professor at the University of Siegen.
„The bureaucratic burden on businesses is already immense and very personnel-intensive. The EU threatens to impose further excessive reporting obligations. Even if there will be  thresholds, these are of no use to small and medium-sized enterprises. What we need is a moratorium and practical checks so that politicians can better assess the effects of the planned laws. In addition, a speedy digitalisation of the administration is urgently needed, for example to make it easier for companies to transmit data to the authorities,“ adds Henrik Schunk, VDMA Vice President and Chairman of the Board of Trustees of the IMPULS Foundation.