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BUSINESS

Ikea boss bemoans German bureaucracy

Ikea is becoming increasingly frustrated at complicated German bureaucracy and public protest, which has slowed expansion plans, company head Mikael Ohlsson said on Friday.

Ikea boss bemoans German bureaucracy
Photo: DPA

The firm was ready to build new stores, but he said applications to build new branches, particularly in residential areas, were often hindered or scrapped all together due to protests from locals and politicians concerned about their area’s small businesses.

“If you take Germany, then we would have liked a further store in Stuttgart, but the discussion has already lasted years and years. And Lübeck took ages,” he said.

Ohlsson said he was disappointed by how slowly the company was expanding in Germany, which is Ikea’s biggest single market, accounting for 15 percent of its global business. There are already nearly 50 branches in the country.

“We want to be nearer to our customers and we’re ready to start building new stores,” Ohlsson said. “The government can stimulate investment in the company by speeding up the bureaucracy process.”

Despite Ohlsson’s complaints, the company announced record profits of €2.97 billion in the last financial year. This is 10.3 percent more than the previous year

This has not discouraged the Swedish furniture giant, however, as Ohlsson announced the company is aiming global, hoping to open up branches in more than its current count of 30 countries.

“Over the coming years we want to grow responsibly and sustainably as a company” Ohlsson said. “Ikea is still relatively small in many countries. Like in China, for example. We have decided to aim for growth to triple there in the coming year.”

Ohlsson also told press that the furniture giant plans to build at least one new shop every year, for the next ten years. “I hope Germany will be able offer us our support in this,” he said.

The Local/DPA/jcw

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ECONOMY

German consumer prices set to rise steeply amid war in Ukraine

Russia's war in Ukraine is slowing down the economy and accelerating inflation in Germany, the Ifo Institute has claimed.

German consumer prices set to rise steeply amid war in Ukraine

According to the Munich-based economics institute, inflation is expected to rise from 5.1 to 6.1 percent in March. This would be the steepest rise in consumer prices since 1982.

Over the past few months, consumers in Germany have already had to battle with huge hikes in energy costs, fuel prices and increases in the price of other everyday commodities.

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With Russia and Ukraine representing major suppliers of wheat and grain, further price rises in the food market are also expected, putting an additional strain on tight incomes. 

At the same time, the ongoing conflict is set to put a dampener on the country’s annual growth forecasts. 

“We only expect growth of between 2.2 and 3.1 percent this year,” Ifo’s head of economic research Timo Wollmershäuser said on Wednesday. 

Due to the increase in the cost of living, consumers in Germany could lose around €6 billion in purchasing power by the end of March alone.

With public life in Germany returning to normal and manufacturers’ order books filling up, a significant rebound in the economy was expected this year. 

But the war “is dampening the economy through significantly higher commodity prices, sanctions, increasing supply bottlenecks for raw materials and intermediate products as well as increased economic uncertainty”, Wollmershäuser said.

Because of the current uncertainly, the Ifo Institute calculated two separate forecasts for the upcoming year.

In the optimistic scenario, the price of oil falls gradually from the current €101 per barrel to €82 by the end of the year, and the price of natural gas falls in parallel.

In the pessimistic scenario, the oil price rises to €140 per barrel by May and only then falls to €122 by the end of the year.

Energy costs have a particularly strong impact on private consumer spending.

They could rise between 3.7 and 5 percent, depending on the developments in Ukraine, sanctions on Russia and the German government’s ability to source its energy. 

On Wednesday, German media reported that the government was in the process of thrashing out an additional set of measures designed to support consumers with their rising energy costs.

The hotly debated measures are expected to be finalised on Wednesday evening and could include increased subsidies, a mobility allowance, a fuel rebate and a child bonus for families. 

READ ALSO: KEY POINTS: Germany’s proposals for future energy price relief

In one piece of positive news, the number of unemployed people in Germany should fall to below 2.3 million, according to the Ifo Institute.

However, short-time work, known as Kurzarbeit in German, is likely to increase significantly in the pessimistic scenario.

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