Economy in Berlin-Brandenburg: economy is treading water – structural weakness is becoming more entrenched

The business situation improves slightly at the start of the year. The situation indicator rises by two points to nine points. Nevertheless, there is no stable positive trend in any sector of the economy. In Brandenburg, services in particular and a slight improvement in the retail environment are providing a minimal improvement. In Berlin, larger industrial companies in particular are driving the situation indicator upwards: Exports are on the rise again, with 32% of companies reporting an increase in exports, compared to just 18% in the fall. However, the retail and hospitality sectors are suffering from a lack of consumer confidence.

Scepticism prevails when it comes to future business development. In Brandenburg, expectations are rising slightly, but remain clearly negative. In Berlin, too, the outlook is brightening somewhat in three out of five sectors – but without any real optimism. This skepticism has an impact on personnel planning: Companies remain cautious and the majority are not planning to increase employment. This is particularly true for Brandenburg. The picture is similar for investment plans. Only 54% of companies are still planning investments, and investments in expanding capacity are particularly rare.

The stable willingness to invest in innovation is a positive aspect. 
When asked about the biggest risks to business development, the economic policy environment once again came in first place. For two thirds of companies, bureaucracy, long approval procedures and tax burdens are the biggest business risks, followed by high labor costs and weak domestic sales.

André Fritsche, Managing Director of the Cottbus Chamber of Industry and Commerce: "There is no all-clear, the situation for the Berlin-Brandenburg economy remains worrying. Companies remain skeptical about the coming months. There is no sign of a trend reversal. The outlook is most negative in Brandenburg's trade and construction sectors, with only the hospitality industry showing glimmers of hope. In Berlin's economy, industry and construction are sending out more optimistic signals for the first time in four years, although the expectations of service providers and retailers have become gloomier. Political decisions must continue to be consistently geared towards growth and investment and reforms must be implemented swiftly. This also includes having the courage to bid for Expo 2035 in the metropolitan region. The expected boost in innovation and investment would have lasting positive effects for the eastern German states."

Dr. Christian Herzog, Managing Director of the Potsdam Chamber of Industry and Commerce: "In the next ten years, over 150,000 jobs at our companies are at stake in our chamber district alone. If we take all the CCIs in our region together, the number will be significantly higher. The danger is real: every second company in Berlin and Brandenburg will need a successor in the next ten years. Since 2022, when we last asked the questions, nothing has changed. On the contrary, the problem has become a permanent risk for our economy. That's why we now need targeted programs, financing guarantees and tax incentives from the federal states to make it easier for entrepreneurs to hand over their businesses."

Manja Schreiner, Managing Director of IHK Berlin: "We are talking about a prolonged economic and structural weakness. In this situation, politicians must do everything they can to strengthen the economy. And above all, refrain from doing anything that places additional burdens. First and foremost, this means abandoning the apprenticeship levy and avoiding debates about expropriation or socialization. Because only flourishing and growing companies create jobs and generate tax revenue."

Monique Zweig, Managing Director of the East Brandenburg Chamber of Industry and Commerce: "We are seeing weak investment activity in the entire Berlin-Brandenburg capital region, which is worrying. The combination of a lack of investment, weak demand and rising costs is slowing down growth today and tomorrow. This can also be seen in the labor market, where the need for personnel is declining. Nevertheless, the shortage of skilled workers remains critical, particularly with regard to the reliable availability of personnel against the backdrop of increasing retirements. However, there is also a ray of hope for future productivity gains – the increasing willingness of companies to invest in digitalization and automation."