As of: March 15, 2024, 5:44 a.m
By: Bona Hyun
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Germany is apparently continuing to lose its attractiveness as a business location, especially abroad.
This also alarms the federal government.
Berlin – Germany is apparently becoming more and more unattractive for foreign investors.
“With high costs, grueling bureaucracy and broken infrastructure, foreign companies think twice before investing a euro in Germany,” said the director of the German Economic Institute (IW), Michael Hüther, to the Handelsblatt
.
“Germany is losing more and more ground in the location competition.”
Investors distrust Germany as a location – Lindner sounds the alarm
New figures from the IW, which are available to the
Handelsblatt
, also provide gloomy forecasts about investments.
Accordingly, direct investments in Germany are declining at a rapid pace.
Net outflow moderated in 2023 after swelling to record levels in 2021 and 2022.
Paradoxically, German companies are expanding their business in neighboring countries, while direct investment from abroad has been declining year after year since 2020.
The inflows have not been as low as last year since 2014.
Germany is becoming less attractive as a location and investors are increasingly distrusting Germany.
© IMAGO / Jürgen Heinrich
In an international comparison, Germany is falling further behind.
This also worries the federal government.
“There is no shortage of private capital.
Nevertheless, too little is being invested in Germany as a location,” said Finance Minister Christian Lindner (FDP) to the
Handelsblatt
.
But: The attractiveness of the location has been “neglected in the past”.
More and more investors are withdrawing from Germany – the automotive industry is affected
Foreign companies now perceive Germany as not being economically and politically robust.
Only 58 percent of the CFOs of subsidiaries of foreign corporations still rank Germany among the five most stable European countries.
This is the result of a survey by the auditing firm KPMG, the results of which
were first published by
Handelsblatt .
Two years ago, 80 percent of those surveyed considered Germany to be one of the most stable countries in the European Union (EU).
The war in Ukraine could play a role, as could the weak economic situation, which is also reflected in the forecasts of low economic growth.
During the Corona times, a different picture existed, “because of his reliable political leadership and quick implementation of the agreed Corona measures,” said KPMG divisional director and study author Andreas Glunz to the
Handelsblatt
.
Germany less attractive to investors - which sectors are particularly hard hit
Some industries are hit particularly hard by developments in Germany.
It is primarily the automotive and chemical industries that are becoming increasingly independent of Germany as a location and could relocate their businesses.
The technology group and German auto supplier ZF is investing heavily in the USA.
The company is expanding its transmission plant in Gray Court, South Carolina, for $500 million (around €460 million).
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The chemical industry, in turn, is suffering because its most important buyers are also in crisis: "The most important buyers for chemical products are the automotive industry and construction - and therefore industries that are themselves under considerable pressure," said BCG chemistry expert Marcus Morawietz to
Wirtschaftswoche
.
There is a great danger that chemical companies will relocate or shut down their business in Germany.
Germany is losing its attractiveness and competitiveness as a location
In addition to its declining attractiveness as a business location, Germany is also losing competitiveness.
Most recently, Germany took 18th place among the 21 countries in the new “Country Index for Family Businesses” (as of 2023).
In 2020, Germany was in 14th place.
The prospects for the German economy remain less than optimistic.
At least that is the opinion of Marcel Fratzscher, head of the German Institute for Economic Research (DIW).
The researchers expect stagnation in 2024.
The researchers also note that “the mood in Germany is extremely bad,” Fratzscher told
Wirtschaftswoche
.
He primarily highlights companies, but also private consumers.
The mood also has an impact on the economy.
“Part of this weakness certainly has something to do with psychology, with the mood, which is significantly worse in Germany than in many other economies.” (bohy)