Unexpectedly sharp drop in the number of business founders in Germany

• In 2017, 557,000 individuals started their own business
• Start-up activity thus dropped by another 17%
• But opportunity and innovative start-ups increased

The decline in start-up activity in Germany continues at an unexpectedly fast pace. A mere 557,000 entrepreneurs started a new business in 2017. That was 115,000 fewer business founders than in 2016, a 17% drop. In the past years, there was no way to resist the pull effect of the very good labour market, and in 2017 the growth effect picked up noticeably. “The very good business cycle was actually an invitation to start a business. Instead, start-up activity dropped again sharply, particularly part-time entrepreneurship”, said KfW’s Chief Economist Dr Jörg Zeuner. “The record labour market situation is obviously shattering the usual correlation of unemployment and growth with start-up activity. Never before has it been easier to find salaried employment, even if just for extra income. And those who are already in salaried employment are too busy working to start a part-time business.” The number of part-time business founders plummeted by 101,000 or 24% to 323,000, but full-time business founders only by 14,000 or 6% to 234,000 persons. These are the findings of a preliminary evaluation of the KfW Start-up Monitor, the annual representative survey of start-up activity in Germany.

What is encouraging is that the trend in economically particularly significant start-ups is going in the opposite direction. There were 334,000 entrepreneurs who founded a business on the basis of a particular business idea, which was 8% more opportunity start-ups than in the previous year. 76,000 entrepreneurs conducted research and development work with the aim of introducing technological innovations. The number of innovative start-ups thus grew by 31% and recovered partly after the slump in the previous year. “Germany needs innovation. Germany needs people who create businesses from their ideas. All of us need to make efforts – particularly in view of the very good situation on the labour market – to support them on their bold path to self-employment.”

Note:
In the version published on 21 February 2018, there was a mistake: the drop in start-up activity was indicated at 14% instead of 17%. We have corrected that on 26 February 2018. All other figures were correct.

Note:
The preliminary evaluation of the KfW Start-up Monitor can be found at:
www.kfw.de/kompakt. The full report will be presented by Dr Jörg Zeuner on the occasion of a press briefing in Frankfurt on 29 May 2018.

Note:
You will find an interesting dossier on the topic of start-ups on KfW’s storytelling platform only in German: www.kfw.de/stories/dossier-digitale-gruender