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German Industry Criticizes High Energy Costs as Self-Created Issue

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German Industry Criticizes High Energy Costs as Self-Created Problem

Germany's small and mid-sized companies, which play a vital role in Europe's largest economy, are calling on the government to alleviate burdens such as excessive bureaucracy and high energy costs, which they believe are partly self-inflicted. Christoph Ahlhaus, chairman of BVMV, the association of mid-sized companies, suggests that Germany should focus on seeking new sources of innovation and growth beyond heavy industry and the chemical sector. However, to achieve this shift, the government needs to establish a new framework for future investments. Ahlhaus points out that the high energy costs in Germany are a result of the government's desire to address global climate change issues. However, he believes that it is not feasible for Germany to tackle these problems alone. Chancellor Olaf Scholz has pledged to implement comprehensive reforms to assist German industry in navigating a significant transformation after the disruption of cheap energy imports from Russia and the dimming growth prospects in key markets like China. However, progress has been slow due to internal disputes within the ruling three-way coalition. Small and mid-sized businesses, known as the Mittelstand, contribute to nearly 60% of jobs and almost half of Germany's economic output. These specialized, family-owned manufacturers operate globally but often do not receive the same level of attention as larger industrial giants like Volkswagen, Siemens, or BASF. Despite this, many of these smaller companies also rely on China for supplies, which has been challenging due to economic slowdowns and labor shortages caused by the pandemic. Ahlhaus acknowledges that it is more difficult for smaller businesses to change their supply chains. However, he sees the partial unwinding of supply chains from China as an opportunity for nimble companies to explore new revenue sources. Additionally, Africa is seen as a potential market for future growth. Ahlhaus dismisses media reports labeling Germany as the "sick man of Europe," emphasizing the need for the government to take action to prevent such a situation and support economic recovery. In conclusion, German industry leaders are calling for measures to address high energy costs and bureaucratic challenges. The ability to adapt supply chains and explore new markets will be crucial for the success of small and mid-sized companies. The government's support and reforms are essential to ensure Germany's economic resilience and prevent further contraction.

Implications of High Energy Costs on New Businesses in Germany

The high energy costs and excessive bureaucracy that Germany's small and mid-sized companies are grappling with could pose significant challenges for new businesses. These companies, known as the Mittelstand, play a pivotal role in Europe's largest economy, and their concerns could signal potential hurdles for emerging enterprises.

Energy Costs and Bureaucracy

The high energy costs, seen by industry leaders as a self-created problem, could deter new businesses from establishing operations in Germany. Christoph Ahlhaus, chairman of BVMV, highlights that these costs are a result of the government's efforts to address global climate change. However, the slow progress in implementing reforms to alleviate these costs could discourage new businesses.

Supply Chain Adaptation and Market Exploration

Furthermore, the challenges faced by the Mittelstand in adapting their supply chains and exploring new markets could also impact new businesses. Ahlhaus acknowledges the difficulties in unwinding supply chains from China, a key supplier for many companies. However, he also sees this as an opportunity for nimble businesses to explore new revenue sources, such as Africa. In conclusion, the high energy costs and bureaucratic challenges in Germany could pose significant hurdles for new businesses. However, with the right strategies, these challenges could also present opportunities for market exploration and supply chain adaptation. Government support and reforms will be crucial in creating a conducive environment for new businesses.
Story First Published at: https://financialpost.com/pmn/business-pmn/german-industry-slams-high-energy-costs-as-self-made-problem
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