German companies “lose €300bn a year” from illegal working

German companies lose €300bn in turnover every year to competition from unregulated rivals, with construction firms hit hardest, according to research from the German Economic Institute (IW) published this week.

The institute’s research suggested that 10% of builders estimate that competition from companies that do not comply with tax and labour laws cuts their turnover by 30%.

Dominik Enste, the IW’s head of business ethics, commented: ""In view of the current construction boom, it is worrying that more than 80% of construction companies suffer from the illegal competition."

The IW recommends that public sector clients impose sticter conditions on tenders and try to put in place "more effective controls". It adds that 75% of the companies it surveyed want more regulation by tax authorities and tougher laws, and 67% call for harsher penalties for violating the rules.

OECD data shows that between 2003 and 2018, Germany has been more affected by black market labour than 11 over countries, including the US and Switzerland, but has not suffered as much as many countries in Eastern and Southern Europe, such as Poland, Italy and Greece.

The IW compiled its estimates based on interviews with 853 companies. A copy can be downloaded here.

Image: Germany’s construction industry is one of the hardest hit by "Schwarzarbeit" (Dreamstime)

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