The number of new businesses founded in the first six months of this year fell by 15.5 percent compared to the first half of 2019, and the number of business closures even fell by 20 percent. A total of 6,800 more businesses were founded than closed. In the first half of 2019, this figure was 600.
The researchers have identified three aspects that had a particularly strong impact on start-up activity in the first half of 2020: the national border closures at the beginning of the Corona crisis, the different economic consequences of the pandemic for individual sectors, and the support measures provided by the federal and state governments.
Entry restrictions dampen start-up activity
"At the beginning of the COVID-19 pandemic, entry of foreign nationals into Germany was significantly restricted. This appears to have had a negative impact on start-up activity, as the number of sole proprietorships founded by foreign nationals fell by more than 25 percent in the first half of 2020—a sharper decline than for German nationals. For the latter, the decline was around 14 percent,"
says Rosemarie Kay from IfM Bonn.
"One indication that the entry restrictions were a factor is the number of start-ups in the construction industry, which normally attracts a large number of foreign nationals, including those who enter the country specifically for this purpose. Here, the number of start-ups fell disproportionately sharply – contrary to existing demand in the construction market."
The number of new businesses also declined in the hospitality industry and in the arts, entertainment, and recreation sectors. IfM researchers observed an increase in new businesses in the health and social services sector, agriculture and forestry, fishing, and financial and insurance services.
The researchers attribute the sharp decline in business closures primarily to financial support from the federal, state, and local governments, as well as to the suspension of the obligation to file for insolvency. An increase in closures is expected among those companies that have been severely affected by pandemic-related restrictions for a longer period.
