Investments end up abroad
Germany is becoming less and less attractive for companies
November 14, 2023, 7:53 a.m
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Lower energy costs, less bureaucracy: Compared to Germany, other industrial locations offer significant advantages for companies. A survey now shows that many companies are already taking action. Two sectors in particular believe that the attractiveness here will continue to decline.
According to a study, Germany as an industrial location is rapidly losing its attractiveness. The consulting firm Deloitte said that two thirds of the companies it surveyed had already relocated parts of their added value abroad. In the areas of mechanical engineering and automobiles, many of the decision makers surveyed assume that the attractiveness of the location will continue to decline.
45 percent of the companies surveyed expect Germany to fall further behind compared to other industrial locations. Among companies in mechanical engineering and the automotive industry, the figure is as high as 65 percent, of which almost two thirds expect a significant loss of attractiveness and a third expect a slight loss of attractiveness. According to Deloitte, the assumption that the attractiveness of the location will remain the same (46 percent) prevails in the other sectors – including chemistry, construction, transport and logistics. At least 20 percent expect this to become increasingly attractive.
67 percent of the companies surveyed have already responded to the situation with a moderate to strong shift in their value chain. According to the study, these shifts have so far concentrated on component production. However, planned relocations increasingly also affect “higher value added parts” such as pre-assembly and production in general. Corporate areas that are rarely considered for relocation are purchasing, supporting services, research and central corporate functions such as management, marketing and sales.
Asia and the USA are important investment destinations
According to the survey, the most important reasons for investing in other countries are lower energy costs (59 percent), lower wages (53 percent), a better market environment (51 percent) and less bureaucracy (50 percent). Access to raw materials, better investment conditions or subsidies, good logistics connections and the availability of qualified workers were mentioned less frequently.
For the reasons mentioned, mechanical engineering and the automotive industry are primarily drawn to Asia and the USA. In the other sectors, however, other EU countries predominate as investment destinations. There are also noticeable trends in other sectors towards relocations from Asia to the USA or Europe. Among the EU countries, Poland, Romania and the Czech Republic are mentioned particularly frequently.
According to Deloitte, the vast majority of companies surveyed assume that Germany will lose in the current subsidy race with the USA and China. Even though a majority of 36 percent emphasize that Germany needs to be more active here, company representatives, particularly in mechanical engineering and the automotive industry, are not generally calling for more subsidies or investment incentives, but rather for a reduction in bureaucracy, competitive energy prices and investments in education, infrastructure and digitalization.
According to its own information, Deloitte surveyed 108 “supply chain managers” in large companies (83 percent) and small and medium-sized companies (17 percent) in September with the support of the Federation of German Industries.