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BERLIN IS A MAJOR TECH POWERHOUSE
ECONOMY
It is Germany’s largest industrial town and a major centre of trade and technological development; many companies maintain facilities in the city
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B
erlin is one of Europe's leading centers of science and research with numerous innovative start-ups and investment projects in growth industries such as biotechnology and medical technology as well as in the new key technologies. As such, Berlin is one of Germany's top three venture capital hotspots. An average of 20 percent of German VC capital flows into high-tech companies in Berlin.
Venture capitalists in Berlin provide financing for every phase of new business undertakings. The city boasts a tightly linked network of venture capitalists, business angels and entrepreneurial teams. Berlin plays host to im-
portant financial conferences on private equity, such as the German Equity Forum (Eigenkapitalforum) and the German Equity Day.
In Germany, FinTechs are becoming an increasingly powerful engine for the economy. German FinTechs raised 2.1 billion euros in capital in the first half of 2021 alone, two thirds of it in Berlin. Trend: still rising, as shown by the recent mega financing round at N26. Overall, a strong ecosystem for financial technologies has developed in the capital, which attracts a large number of investors, capital and founders from all over the world. As a result, Berlin is also taking on a leading role as a digital financial center in Europe.
Boasting one of the densest network of startups, deepest pools of experienced talent and some of the world’s most sophisticated investors, Berlin is a major tech powerhouse and one of the world’s largest fintech hubs in the world. The city is home to some 400 fintech companies, or over a third of all fintech companies in Germany. In 2018 and 2019, Berlin accounted for 70% of all fintech funding in Germany, with fintech companies raising approximately EUR 1.8 billion in investment. Fintech data specialist Findexable ranks Berlin as the second biggest fintech hubs in Europe, and the sixth biggest globally.
The general shortage in qualified workers affects Berlin, too, but Berlin has the advantage of being at the centre of a region that's home to about six million people. Companies looking for well-qualified specialists find great potential in here. Berlin has the highest per capita density of researchers and university graduates in Germany. More than 30,000 new graduates enter the city's labour market every year.
An important competitive advantage is the city's international attractiveness. Berlin attracts professionals from all over the world. People from over 190 nations live and work here. Nearly 2 million of the city's inhabitants speak at least two languages. Companies planning to hire new staff can take advantage of various funding opportunities and programmes to train, recruit, and qualify specialists offered by the Federal Government and the State of Berlin.
Up until the Corona year 2020, Berlin was able to enjoy to rapid economic growth. Both the increase in gross
domestic product and the number of people in employment have been above the national average for years. The positive development in employment subject to social security contributions was particularly satisfying.
While gross domestic product rose by 2.6 % in 2019, it fell to -3.3 % in 2020 due to Corona (Germany -4.9 %). The number of people in employment also fell when compared with the previous year by -0.4 % (Germany -1.1 %). An increase of 2.2% was recorded in 2019. However, the forecasts for the Berlin economy are good. After a weak start to the year, it is expected that the economic level of 2019 will be reached again at the beginning of 2022.
ECONOMY THE ECONOMY GREW BY 2.7% IN 2021
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he German economy shrank as much as 1 per cent in the final three months of last year, as the latest coronavirus restrictions and supply chain bottlenecks kept output below pre-pandemic levels. The Federal Statistical Office on Friday published initial estimates showing Europe’s largest economy managed growth of 2.7 per cent last year, despite fourth-quarter output falling between 0.5 and 1 per cent from the previous quarter. The figures mark a rebound from 2020, when German gross domestic product shrank 4.6 per cent in a record postwar recession caused by the Covid-19 crisis. But the country is lagging behind other big economies, including the US, France and UK, which have rebounded above pre-pandemic levels of output. Economists expect the German economy to rebound strongly later this year once coronavirus restrictions are lifted and supply bottlenecks ease. But they worry that if the problems persist, the country could slide into recession — defined as two consecutive quarters of falling GDP.
The Bundesbank last month cut its German growth forecasts but said it still expected the economy to rebound above pre-pandemic levels of GDP in the coming months with growth of 4.2 per cent in 2022, boosted by a “boom in private consumption”, as well as higher exports and business investment.
The German economy grew by 2.7% in 2021 after another year of surging Covid-19 cases, pandemic-related restrictions and supply chain pressures. The statistics office said that German growth was still 2% lower in 2021 than in 2019, showing that the economy has
not yet returned to pre-Covid levels. In the second half of 2021, signs emerged that the German economy could be hit by supply chains issues. In October, the country’s leading research institutes slashed their forecasts for growth in 2021 to 2.4%. The German government also lowered its expectations for annual growth in 2021. Looking ahead, upcoming economic performance remains clouded by uncertainty.
Germany increased net new borrowing to a record 215 billion euros ($245.87 billion) last year following an unprecedented sum of 130 billion euros in 2020 to fund the fight against COVID. The public sector deficit of all state levels rose to 153.9 billion euros or 4.3% of economic output. The economy ministry said in its monthly report that ongoing supply bottlenecks for important primary products in manufacturing were likely to persist for a while.
The price-adjusted gross value added in manufacturing rose markedly by 4.4% year on year. Notable increases were recorded also for most of the service sector compared with 2020. The economic performance in the field of business services, which include research and development as well as legal, tax consultancy and engineering activities, was up by 5.4%. At 3.0%, economic growth was somewhat lower in the aggregated economic sector of trade, transport, accommodation and food services due to the continuing pandemic restrictions. Compared with 2020, the economic performance was down slightly only in construction (-0.4%), which had not been visibly affected by the Covid-19 pandemic in 2020.
Despite the increases of 2021, economic performance has not yet reached pre-crisis levels in most economic sectors. Economic performance in manu-
facturing, for instance, was still 6.0% below the level of 2019 in 2021. Other services, which include creative activities in addition to sports, culture and entertainment, were hit particularly hard by the continuing Covid-19 pandemic. Here the price-adjusted value added was even 9.9% below the pre-crisis level in 2021. The decline in economic performance recorded in the crisis year of 2020 for public services, education, health was almost compensated for in 2021. Construction as well as information and communication were able to sustain their positions during the pandemic and considerably increase their economic performance compared with 2019.
Gross fixed capital formation in construction grew by only 0.5% in 2021 due to labour and material shortages after having risen more strongly for five consecutive years. Gross fixed capital formation in machinery and equipment increased a price-adjusted 3.2% in 2021 but had in fact decreased sharply in the crisis year of 2020.
In 2021, foreign trade recovered from the strong decreases of the previous year. German exports of goods and services were up a price-adjusted 9.4% on 2020. Imports increased by a price-adjusted 8.6% in the same period. In 2021, Germany’s trade with foreign countries was thus only slightly below the level of 2019.
Employment gains were recorded for public services, education, health (+2.2%), information and communication (+2.4%) and construction (+1.2%). In contrast, employment losses were observed for trade, transport, accommodation and food services as in the year before (-1.8%). The number of marginally employed people and self-employed continued to fall, while more persons in employment were subject to social insurance contributions.
