-Resource from EU Business School
Germany has been ranked as the best European country for startups for the second year in a row.
In its annual study, research and analysis firm NimbleFins looked at data from a variety of publicly-accessible sources, including the World Bank, World Economic Forum and UNESCO. It then rated each candidate country according to metrics like GDP per capita, growth and unemployment rates, daily business costs, regulatory burdens and more.
Germany scored incredibly well in all four of the categories that were evaluated: economic health, cost of doing business, overall business environment and labor quality.
In this post, we’re going to take a closer look at the results and discover what makes Germany such a great place for new businesses.
A Healthy and Growing Economy
The German economy, which underpins its thriving startup culture, is the fourth-largest in the world. NimbleFins took a handful of key factors – GDP per capita, GDP growth rate and unemployment levels – into account when determining overall economic health. Germany scored exceptionally well on all counts and was placed third overall on NimbleFin’s economic rankings.
The German economy is well-known for being one of the most progressive and productive in Europe. Germany was ranked as one of the world’s ten most innovative countries in the 2019 Global Innovation Index and is home to several global companies, including Volkswagen, Daimler and BMW. Germany also exercises considerable influence over other nations in the eurozone and plays host to international trade shows like MEDICA, the Hannover Fair and Automechanika. Berlin has gained a reputation as a global tech capital, with an especially vibrant startup scene.
Germany’s dedication to innovation is exemplified by the Agency for Breakthrough Innovations, a government-founded organization tasked with bringing radical technology to the market by supporting promising research projects and emerging companies.
Startups can also take advantage of an array of funding initiatives, including cash grants, research sponsorships and hiring incentive programs which encourage businesses to grow their workforces.
A Welcoming Business Climate
NimbleFins took a comprehensive approach to evaluating the business climates of the European countries in its report. Many factors, such as trust in the judicial system, availability of startup capital, regulatory burdens and the dominance of large companies, were taken into account.
Europe, and the European Union in particular, is often accused of stifling enterprise with unnecessary bureaucracy and red tape. But Germany has one of the lightest regulatory burdens of any European nation and is second only to Switzerland in this regard. This might come as a surprise as it’s often assumed that more ostensibly laissez-faire economies like Ireland and the United Kingdom lead in this area.
German startups can expect a great deal of access to venture capital funds and low levels of market dominance from monopolies and large corporations. Major German cities like Berlin, Munich and Frankfurt are home to thriving startup scenes.
Germany only scored poorly in the area of judicial independence. Politicianshave a lot of sway over the appointment of judges, which has led many to question the neutrality and independence of those working at various levels of the justice system. That said, the legal frameworks designed to protect businesses, especially in relation to investment and intellectual property, are among the most robust in the world.
All in all, Germany boasts reliable infrastructure, an open, progressive business culture, low barriers to entry in most markets, and a largely supportive regulatory and legal environment.
A Relatively Low Cost of Doing Business
Running a business in a major European city is rarely an inexpensive affair. A range of factors, including substantial employee salaries, high rents and a large bureaucratic burden, can cause fledgling companies’ bank balances to quickly dwindle.
But as far as costs go, Germany isn’t as bad as you might think, especially when compared to other Western European countries. NimbleFins looked at corporate taxes, overall cost of living and average salaries when evaluating this category.
While Germany has strict tax laws and regulations, a variety of corporate incentives are available to businesses. The laws surrounding taxes can be quite complicated, so it’s advisable for startups to hire a professional who can take care of accounting and other financial tasks. The base tax rate for corporations is 15%. Once various additional fees and surcharges have been accounted for, the figure is closer to 30%.
The German government is very supportive of new businesses and offers a number of resources for entrepreneurs, including English-language guidance online and access to help via the Chamber of Commerce and Industry (Deutscher Industrie- und Handelskammertag) and other government bodies. And while there are several layers of registration required to set up a new company, costs are relatively low. Approximately two million new businesses are registered in Germany every single year. Fast-growing startups include CoachHub, Wandelbots and Sharpist.
A Skilled, Industrious Labor Force
The German workforce is well-known for punctuality, attention to detail, high levels of tertiary education and vocational training.
NimbleFins took a number of data-points into account when evaluating each country’s labor force. Overall, Germany ranked fifth on educational attainment rates. 83% of Germans have an upper secondary education and 26% have some kind of tertiary qualification. The quality of staff and vocational training programs is also very high, and here Germany came in sixth overall.
Just as importantly, NimbleFins evaluated the ease with which startups could access highly-trained employees, which can often be a make-or-break factor. Germany was one of the top performers in this area, ranking seventh out of thirty.
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