Recession and Raids: German Builders Face Economic Stagnation and Intensified Labour Checks

Investment willingness among German mid-sized firms hits 1990s low. Authorities intensify workplace inspections in construction, uncovering safety and immigration violations, with fines up to €10,000.

Just as a DZ Bank study released in mid-July showed that investment willingness among German mid-sized companies had slumped to its lowest level since the mid-1990s, authorities have ramped up workplace inspections across the construction and skilled trades sectors. Only about half of all Mittelstand firms now plan new investments. High energy costs, raw material prices and persistent supply bottlenecks are the main drags.

The construction main trade — the building core sector — is bearing the brunt of the downturn. Industry surveys from spring 2026 confirm a downward spiral in orders and revenues. While the finishing trade still reports occasional stability, trade associations are urging the federal government for stimulus. The economic strain is visible even beyond construction: bakery insolvencies jumped 40 percent in the first half of 2026 compared with the previous year, driven by structural change and price wars with supermarket baked-goods sections.

Into this fragile climate stepped the Finanzkontrolle Schwarzarbeit (FKS), the German customs’ anti-illegal-work unit, with a series of large-scale operations. In late June, during statewide action days in North Rhine-Westphalia, around 550 enforcement officers checked more than 100 construction sites and interviewed over 1,000 employees. The tally: 77 criminal proceedings and more than 150 administrative-offence cases.

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Mid-July saw targeted raids in several regions. In Bielefeld, investigators from the main customs office and labour protection authorities uncovered serious safety deficiencies — missing fall protection, poorly anchored scaffolding and inadequate protective equipment. Dozens of suspected violations are now under review. Separately, in the Hamm area, inspectors identified illegal employment relationships involving workers without valid residence permits.

Beyond the site-level checks, authorities struck at an international fraud network in mid-July. More than 70 suspects were identified in a complex web of shell companies allegedly used for VAT fraud.

For companies still operating legally, compliance demands are rising. A representative from the Düsseldorf main customs office stressed that workers must carry original identity documents — either a national ID card or passport — during inspections. Copies, even notarised ones, are not accepted. Registration in the Handwerksrolle (the official trade register) is also crucial; chambers of skilled crafts check for mandatory entry in suspicious cases. Violations can trigger fines of up to €10,000, while business closures are typically ordered by local municipalities.

Lawyers advise firms to cooperate fully during customs checks and to seek early legal counsel. A specialist in tax criminal law noted that meticulous working-time documentation and proper verification of social security contributions are essential to avoid criminal liability.

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The scale of potential liability was illustrated by a judgment handed down in summer 2026 at the Landgericht Ingolstadt. The managing director of a demolition company was given a suspended prison sentence for evading roughly €1.2 million in social security contributions over several years using a system of shell companies.

Additional nationwide priority inspections have already been announced for the rest of the year, focusing on compliance with the statutory minimum wage in logistics, hospitality and construction.