Bureaucracy, as a functioning legal framework for a national economy, is indispensable to the economy and society. However, for years now, companies have been increasingly burdened by regulations from Europe, the federal government, the states, and local municipalities. According to a survey by the Allensbach Institute for Public Opinion Research, 65 percent of businesses report that the administrative burden has increased since the introduction of the “one in, one out” bureaucracy-reduction measure in 2015—despite several laws aimed at reducing red tape.

In its 2024 annual report, the National Regulatory Review Council (NKR) estimates the ongoing compliance costs at 27.1 billion euros—of which the business sector bears the lion’s share at 14 billion euros. The report clearly highlights where better regulation, less bureaucracy, and modern administration must focus their efforts. The BDI supports this nuanced assessment and agrees with many of the NKR’s recommendations. BDI Chief Executive Tanja Gönner sums it up: “Reducing bureaucracy and increasing government efficiency require greater political resolve and close cooperation between the federal government, the states, and local governments.”

Although German policymakers are implementing selective measures to ease the burden—such as the Fourth Bureaucracy Relief Act (BEG IV)—the overall burden continues to grow: New obligations, such as sustainability reporting or the Supply Chain Due Diligence Act, are increasing the administrative burden. On balance, bureaucracy is on the rise—a genuine reversal of this trend has yet to materialize.

Making it easier to catch one’s breath

Anyone serious about reducing bureaucracy in Germany must address the issue structurally—including at the European level. For years, companies have been confronted with an ever-increasing number of rules, regulations, and reporting requirements, which are often exacerbated by national over-compliance. This causes frustration and significant bureaucratic costs. The European Commission’s plans to reduce bureaucracy are welcome—but action must follow quickly. The German government should work closely with the European Commission and the European Parliament on this issue and present a united and strategically resolute front in the Council of Ministers at an early stage.

Reliable breathing room is essential, especially for small and medium-sized enterprises and family-owned businesses, to help them catch their breath. We need to send a genuine signal of a new beginning for Germany as a business location. Family business owner and BDI President Peter Leibinger emphasizes: “Our strength has always been—and remains—to create innovative, customer-focused products. In recent years, this innovative spirit has been—and continues to be—virtually stifled by excessive bureaucracy. The resources our companies must devote to nonsensical reporting requirements and compliance with pointless or excessive rules are lacking elsewhere. When people are constantly preoccupied with defensive tasks, creativity is stifled.”

Less bureaucracy and efficient regulation promote innovation—and act as a cost-free economic stimulus. They help the private sector and government without placing an additional burden on public budgets. Reducing reporting, filing, and documentation requirements creates more leeway for companies in terms of personnel, finances, and organization. What is needed is political will and pragmatic action.

In Berlin, there should be genuine competition among ministries and in the Bundestag to reduce bureaucracy. At the same time, Brussels must take decisive action against the ever-increasing number of requirements—including reporting obligations—and break with outdated practices. Some measures from the European Commission’s “SME Relief Package” of September 2023 are a step in the right direction. But now it is essential to actually implement the goal of a 35 percent reduction in the administrative burden on small and medium-sized enterprises at the European level.

A sensible approach remains to streamline and simplify legislation swiftly and decisively through “omnibus” regulations.

“We want to do business, not manage bureaucracy”

Hans-Toni Junius, Chair of the BDI/BDA SME Committee, also emphasizes this demand and calls for policymakers to grant businesses more entrepreneurial freedom. “In our day-to-day business operations, we as small and medium-sized enterprises and family business owners feel an ever-increasing burden—for example, due to ever-growing tax, social, and environmental regulations. We are demotivated by rampant paperwork, increasing reporting requirements, and an out-of-control system of appointed officials.”

Consequently, the BDI continuously provides concrete suggestions for reducing bureaucracy at the national and European levels. The goal is a permanently streamlined, effective, and resilient regulatory environment. It is encouraging that the Federal Ministry of Justice (BMJ) launched a comprehensive survey of industry associations on this topic in early 2023. The BDI also participated in this survey with detailed proposals for reducing the administrative burden—focusing in particular on approval procedures and tax relief.

On behalf of the BMJ, the Federal Statistical Office systematically evaluated, prioritized, and compiled the more than 400 proposals from 57 associations for the State Secretary Committee on “Better Regulation and Reducing Bureaucracy.” Yet the result remained disappointing: At the end of August 2023, the cabinet presented an unambitious policy paper in Meseberg. The resulting Fourth Bureaucratic Relief Act (BEG IV) falls far short of expectations—and is by no means sufficient to enhance the country’s attractiveness as a business location.

The BDI has already clearly expressed its disappointment with the draft bill in its statement. Of over 400 specific proposals for reducing administrative burdens, only a fraction were implemented—which demonstrates a lack of political will to bring about change. Information requirements under national law alone will cost companies 66.5 billion euros annually by early 2024. Consequently, piecemeal measures such as waiving written-form requirements and reducing retention periods from ten to eight years amount, in practice, to a drop in the bucket—one that is now a red-hot stone.

Systematically Reducing Bureaucracy

Individual measures within the framework of an omnibus bill cannot sustainably clear the dense—and ever-expanding—bureaucratic jungle in Germany. A competitive economy and an efficient administration require a structural approach. That is why the BDI calls for a consistent, systematic reduction of bureaucracy—based on seven key areas of action:

• Strengthen personal responsibility through trust-based regulation
• Establish a moratorium on new regulatory burdens—further develop the “one in, one out” rule into a genuine net reduction
• Establish a binding path to reducing bureaucracy
• Strengthen the National Regulatory Review Board (NKR)
• Enact better laws—consistently implement proposals from industry and practice
• Accelerate planning and permitting procedures
• Modernize the administration

It is the role of policymakers to implement a growth agenda and thereby create the urgently needed leeway for businesses within a clear framework. This requires a bold regulatory framework, underpinned by a culture of trust and empowerment—both in legislation and in administrative enforcement. Instead of blanket mistrust, trust in businesses’ compliance with the law should be the norm.

Such a cultural shift opens up the opportunity to conduct targeted reviews of existing laws, eliminate redundant reporting requirements without replacement, and free up new entrepreneurial resources. This also includes ensuring that the 1:1 implementation of EU law becomes the standard. Exceptions to the bureaucracy reduction initiative—such as those under the “one in, one out” rule—must be eliminated in order to develop it into an effective moratorium on new regulatory burdens.

Binding net reduction targets are needed for a sustainable and comprehensive reduction of bureaucracy. An annual bureaucracy reduction act—similar to the annual tax act—would be a good approach. Equally necessary: strengthening the NKR financially and in terms of personnel, as well as equipping it with more effective tools to enforce better regulation.

Driving Cultural Change in the Administration

To enact better laws, practical knowledge must be incorporated into the process as early as possible. The federal government should clarify the deadlines in the rules of procedure accordingly and establish a systemic approach that consistently integrates the expertise of practitioners. Comprehensive and cross-ministerial practical, citizen, SME, and digital impact assessments, as well as the use of real-world laboratories, are proven and effective tools for this purpose.

In addition, both project operators and permitting authorities struggle with a tangled web of vague legal terms, complex and difficult-to-understand regulations, a lack of standards, and unmanageable case-by-case provisions. Faster procedures require a fundamental overhaul, particularly of European and German environmental law—and a cultural shift toward a willingness to make decisions and facilitate progress within the administration, which will accelerate planning and permitting processes.

The public administration itself must be comprehensively modernized in order to meet the demands placed upon it. A modern, digital administration should be low on bureaucracy and focused on the economy—not least because companies, with an average of over 200 interactions with government agencies per year, are among the heaviest users of government structures. The BDI has developed a guiding principle for this.

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