A new international location study, aimed at evaluating countries’ frameworks for family businesses, has ranked Germany near the bottom. The study cites Germany’s high corporate taxes and poor-quality infrastructure as reasons for its weak performance.

The Country Index for Family Businesses

The Mannheim-based economic research institute, the Leibniz Centre for European Economic Research (ZEW), has compiled its annual “Country Index for Family Business” which looks at how attractive 21 different industrialised countries are for family businesses. This year Germany ranks 17th, down from 14th place the previous year, with only France, Spain, Japan and Italy performing worse.

The results of the study were revealed by the Family Business Foundation, who commissioned the study. Accordingly, the USA ranked first, followed by Great Britain and the Netherlands. The ZEW included a number of factors in its study, including taxes, labour costs, productivity, human capital, regulation, financing, infrastructure and energy.

Germany lags behind competitors

According to the study, Germany’s biggest weaknesses are its high corporate taxes and labour costs. ZEW also criticised the quality of Germany’s infrastructure, specifically its traffic routes and information technology. "In terms of the quality of its infrastructure, Germany now appears to be clearly lagging behind its competitors in Western and Northern Europe, but also in North America and Japan," the study said.

Germany did score highly when it came to financing and capital resources for family businesses before the start of the coronavirus pandemic in Germany. However, overall, no other country has developed worse than Germany since the study’s inception in 2006. "Now it is urgently important to make Germany more competitive," said Foundation Board Member Rainer Kirchdörfer.