Wednesday 17th November 2021
Partly “worst in the EU”
Foreigners give Germany bad marks as a location
The auditing company KPMG regularly asks foreign corporations for their view of Germany as a business location. This time the answers are even more critical than in previous years. This is also reflected in investment decisions.
“Too expensive and too slow in the transformation”: According to the auditing firm KPMG, foreign corporations are increasingly critical of Germany as a business location and are scaling back their investments. For the tax system and the digital infrastructure, there were particularly bad grades: Here, Germany has “lost further in competitiveness compared to the EU,” said KPMG.
The auditors questioned 360 chief financial officers of German subsidiaries of international corporations from the USA, China, Japan and Europe. According to this, only 19 percent plan to invest at least ten million euros per year in Germany over the next five years. Four years ago, 34 percent wanted this.
The board members surveyed named an inadequate digital infrastructure as the greatest obstacle to investment. For 9 percent of the respondents it is “the worst in the EU”, for a further 24 percent it is “one of the five worst in the EU”. Another result of the survey: “Germany is too expensive – in terms of electricity, taxes and labor costs.” When it comes to industrial electricity, Germany is now at the bottom of the list in the EU, with costs of 18.18 cents per kilowatt hour.
Progress on skills shortages
The CFOs surveyed rated the German tax system as “not competitive”. Meanwhile, ailing roads, bridges and rails have also been criticized. Only 59 percent of the group board members surveyed classified the logistical infrastructure among the top five in the EU. The business location receives the best ratings for standard of living (81 percent), public safety (80 percent) and political stability (80 percent). As a research location, 56 percent of the managers surveyed see Germany in the top group in an EU comparison.
There has been significant progress in the availability of qualified specialists: According to the KPMG survey, 38 percent of companies see Germany in the top five in the EU on this point. However, at an average of 36.60 euros per hour, labor costs are well above the EU average of 28.50 euros. Due to the high level of labor productivity, international investors have so far accepted this. For 72 percent of those surveyed, Germany was at the top. “However, investors are concerned about the stagnation in labor productivity in Germany that has been going on since 2018.”
Also, only every third respondent counts Germany among the top five locations with an environment that promotes innovation. The attractiveness of the location is dwindling. “A further increase in regulation and bureaucracy as a result of the planned EU environmental legislation” is a threat to Germany as an investment location, warned KPMG board member Andreas Glunz.