The Mittelstand is the backbone of the German economy and the reason for its ongoing success. More than 99 percent of all enterprises in Germany belong to the Mittelstand. They account for 60 percent of all jobs and 84 percent of all internships and apprenticeships. As a result, the mid-size sector holds a position of great responsibility in this country, both in economic terms and for the whole of society. And we should work to keep it that way as Mittelstand business leaders take a long-term perspective and their primary goal for their enterprises is to make them fit for the future. The BDI, together with the Federal Ministry for Economic Affairs and Energy (BMWi), the Association of German Chambers of Commerce and Industry (DIHK) and the German Confederation of Skilled Crafts (ZDH) have formulated five key objectives that they are pursuing jointly to secure the competitiveness and robust growth of the mid-size sector. These goals are: to strengthen entrepreneurial spirit, drive the digitisation of the Mittelstand, improve corporate financing and taxation for the Mittelstand, secure the supply of skilled labour and work towards a tangible reduction of bureaucracy.
Germany needs more entrepreneurial spirit
Innovation is important. Only those that bring new ideas to the market and open up new business areas have the potential to grow and withstand the competition. Coming up with ideas is one thing, actually putting them into practice is another. In Germany we need to encourage more young people to do just that. Germany needs a new campaign to inspire young people to become entrepreneurs and we want to help in this endeavour. Being an “entrepreneur” is a profession and we need to encourage more people to take this path. They need to bring their ideas to the market and have the courage to launch their own business. After all, the entrepreneurs of today are the Mittelstand of tomorrow. We should introduce school students to the job profile of “entrepreneur” and show them the associated opportunities and possibilities. We want to support this campaign and help raise the appeal and profile of entrepreneurship. An important part of this is to establish an attractive environment for business start-ups. Another crucial topic is business succession. Handing over a business is a matter that must be addressed in good time and prepared in a systematic way. Over the next few years many enterprises will be changing hands. Many of these companies are having problems finding the right successor. Without a generation of business leaders to carry forward the inheritance of their predecessors, the current success of the Mittelstand will not be maintained. Nor can it last without the transfer of expertise and corporate values from the older to the younger generation. The reform of inheritance tax is therefore a key concern of the BDI. This reform must be Mittelstand-friendly, designed to ensure that SMEs can safeguard jobs, and maintain the Mittelstand and family-business corporate structures here in Germany. Business assets need to be redefined with this in mind. Overall tax levels must not jeopardise the survival of companies that are productive and create jobs and it must not curb their investment activity. The federal government has promised to reform inheritance tax in a “minimally invasive” way and support smooth business transfers. We will take every opportunity to remind the government of these intentions.
Moving into the digital age
Society and the economy are undergoing rapid change. Smart phones and mobile communication are becoming a central component of everyday life; the internet is everywhere, connecting everything and everyone. People link up through social networks and objects communicate via the Internet of Things. Huge volumes of data are being stored in clouds. What does this mean for individual companies? How is the mid-size sector in industry, commerce, services and trade coping with the digital leap into the future? And how can they best use these technologies for their own purposes? We, the BDI, can help them in this process by identifying best practices of enterprises that have successfully achieved the switch to digitisation. Technology can boost business but it also carries risks. Digitisation has already changed the world of work: whole production lines are becoming entirely automated and robotised. In smart factories, machines communicate with each other and huge cloud storages and big data applications help manage data more effectively and make it available to the company’s business operations. The BDI calls for a greater proportion of federal government funding to be channelled into digital projects and the overall volume of such funding to be increased. We welcome the Federal Ministry for Economic Affairs and Energy’s national IT summit that will address the key topics of digitisation. We are also in favour of pushing the European digital single market and of introducing uniform European norms for standardised products that meet the needs of small and mid-sized enterprises. A real-time capable data transmission infrastructure with a speed of at least 50 Mbit per second is particularly important to ensure the Mittelstand doesn’t fall behind in the digital world.
The Mittelstand can only become future-proof if it has access to long-term affordable and stable financing. We therefore welcome the German three-pillar system of private banks, public sector banks and cooperative banks that provides a decentralised supply of financing on reasonable terms and conditions. Guarantee banks are another important factor in the supply of capital to the Mittelstand. We also welcome the broad range of export financing offered by the Federal Economics Ministry and its plans to tailor this financing more precisely to the needs of the Mittelstand. All these measures benefit small and medium-sized enterprises. We expressly support a European-wide harmonisation of the financial markets, as long as this does not disadvantage the Mittelstand, particularly regarding lending to this sector and the new requirements on capital adequacy. It is also important that mid-sized enterprises can continue to participate in the financing of infrastructure projects. Improvements are required primarily in access to venture capital. Young companies in particular need venture capital. Without it they are often not in a position to implement their innovative ideas and large banks tend not to finance product innovations in uncharted market segments.
Skilled labour is our capital
Many companies are already having difficulties finding skilled workers. According to the market research institute Prognos, German industry will face a shortage of four million skilled workers by 2035. Only the concerted efforts of enterprises, chambers of commerce and industry, associations and policymakers can address this shortage and secure the future availability of skilled labour. The main cornerstone here is sustainable training and education. The Mittelstand is aware of its responsibility as an employer and is already investing substantially in the education and further training of its workforce. However, corporate efforts alone cannot compensate for the shortcomings of the education system, which is one of the main factors for the ever-increasing shortage of skilled labour. We need to see sustainable reforms across the entire school system. Schools must take measures to ensure that more young people are interested in technology, engineering, natural sciences and information technology. More young people, particularly university dropouts and young people from immigrant families, need to be encouraged to take up dual-track training, where they learn at a company and a vocational school in tandem. Schools must communicate to students at an early stage that a dual education is of equal value to a university education. We will only be able to produce more skilled workers and keep youth employment low if we manage to show young people the advantages of vocational training and the corporate career path this opens up for them even if they don’t have a university degree. Especially students who perform less welI in school should be encouraged to take this option. They need to be given a chance in our economy. We have to make more of the potential we have in our domestic labour market. Companies must make it easier for women, older people and people with disabilities in particular to pursue a profession. Work must be compatible with family life. Workloads could and should be better distributed. Many companies do in fact already have concepts in place for achieving this but they need to be implemented on a wider scale. Companies must allow and encourage their workers to stay in their jobs for a long time and stay healthy. These are all objectives the BDI and its member enterprises are working to achieve. Yet it is not enough to focus on the domestic workforce alone. We also need to attract international workers to Germany. We should encourage people wanting to immigrate to apply for a job and residence here in Germany. And we must establish the legal certainty that they can remain in the country.
Less bureaucracy is the way ahead
Enterprises live by and for their ideas and hold up to the competition every day. It is therefore understandable that they want to keep the time and cost of bureaucracy and administration as low as possible so they have more energy to focus on their core strengths. We expressly welcome initiatives and legislation designed to limit or reduce red tape as much as possible, especially for the around 3.7 million SMEs in Germany. In recent years, the time that mid-sized enterprises in particular have to spend on complying with bureaucratic requirements has increased many times over. We support overarching initiatives to counter this development such as the Reduction in Bureaucracy Act (Bürokratieentlastungsgesetz) that enters into force in 2016. The Mittelstand stands to benefit particularly from lean administrative procedures, streamlined regulation and minimal bureaucracy. The Reduction in Bureaucracy Act with its courageous 21-point catalogue has already been drawn up and the main reductions will come into effect in 2016. Of course, it is essential that the Act is implemented fully. The following measures would be of tremendous help to SMEs:
- Exemption from accounting and reporting obligations;
- Shorter time periods for keeping tax records;
- A substantial increase in the thresholds for immediate write-offs.
We particularly welcome the federal government’s bureaucracy brake, the so-called “one in, one out” rule. This means that for every new law adopted that increases bureaucracy in one area, another law must be abolished in another area to relieve the strain on the affected companies. Companies need more time and capacities to work on their future rather than documenting the past.