2026 Brings Major Legislative Changes and Economic Challenges for German Companies

As 2025 closes, German companies brace for significant legislative shifts and ongoing economic challenges in 2026. The German coalition government has announced a comprehensive plan to reduce bureaucracy by 25%, aiming to ease the economic burden by approximately 16 billion euros. This includes the introduction of new laws across various sectors such as agriculture, pensions, transportation, and construction.

One of the notable changes is the rise of the minimum wage to 13.90 euros per hour starting January 1, 2026, with plans to increase it further to 14.60 euros in 2027. Retirees can now earn up to 2,000 euros monthly tax-free if they continue working beyond retirement age under the new 'Aktivrente' regulation. Agricultural businesses will benefit from a full refund on agricultural diesel for 2026, while higher CO2 taxes will increase heating costs using oil and gas, impacting consumers.

Additionally, the government plans to launch a digital platform to streamline business registrations, aiming to reduce red tape for companies and freelancers. However, skepticism remains among businesses and freelancers who seek tangible reforms rather than symbolic gestures.

Meanwhile, the Bodensee-Oberschwaben region experienced a tough year in 2025, with supply chain difficulties and economic uncertainties impacting local industries and crafts. Insolvencies in sectors like automotive and metal production rose above average. ZF Friedrichshafen is preparing for short-time work due to supply challenges from chip manufacturer Nexperia.

Despite challenges, the handicraft sector shows promising signs as youth interest rises, contributing to workforce stability. The region benefits economically from its proximity to Switzerland, whose steadier economy provides some relief.

Experts stress the need for clear political frameworks to support businesses, particularly regarding vehicle replacement and housing construction. Concerns about raw material dependence on China highlight the necessity for strategic adjustments in supply chains.

High-specialization industries such as defense, pharma, and software continue to thrive. Diehl Defence plans expansion by acquiring expertise in bomb disposal, showcasing resilience in niche sectors. Business leaders emphasize the importance of appreciating entrepreneurship and fostering skills development to strengthen economic stability going forward.

In summary, German companies face a mix of hopeful reforms and structural challenges in 2026, with government initiatives aimed at economic relief set against continuing global supply and investment uncertainties.