Germany as an industrial location, once hailed as one of Europe’s leading economic powers, is increasingly under pressure
A recent survey conducted by the market research institute Kantar Public on behalf of the management consultancy FTI-Andersch paints a sobering picture: a majority of the manufacturing companies surveyed now take a critical view of Germany as a business location. In particular, rising energy prices, increasing bureaucracy and the scarce availability of skilled labour are causing dissatisfaction.
The study, which surveyed 150 German companies from various branches of industry, revealed that on average, Germany is only rated as a ‘three minus’ (3.3) industrial location. The areas of energy prices and availability as well as regulation and bureaucracy scored particularly poorly, each receiving a grade of 4.0. The availability of skilled labour is also perceived as inadequate with a score of 3.9. These results reflect the growing challenges that German companies are facing in the current economic environment.
Relocation of production capacities as an option
As a result of these negative developments, a quarter of the companies surveyed (26 per cent) are considering relocating production capacities and networks abroad. Asian countries are particularly popular, with 40 per cent of companies that have concrete plans to relocate preferring Asia as a target region. China in particular is seen by many as an attractive location, not least due to the targeted promotion of foreign investment by the Chinese government.
The fact that China is becoming more attractive as a location is also reflected in the general assessment of the companies surveyed: Every second company (50 per cent) considers China to be an attractive location for the coming years, with 8 per cent even rating China as very attractive. This development illustrates the increasing relocation of global production networks and the need for German companies to remain internationally competitive.
Germany is becoming less attractive
The majority of the companies surveyed now see Germany as a less attractive location (46 per cent) or even as unattractive (15 per cent). The high energy prices and complicated regulatory framework are seen as a particular hindrance. 39 per cent of companies stated that they rated the energy supply in Germany as inadequate or insufficient, while 34 per cent rated the availability of skilled workers and 31 per cent the bureaucracy negatively.
However, the proximity to relevant sales markets (score 2.4) and the infrastructure and transport links (score 2.5) were rated positively. These factors remain strong arguments in favour of Germany as a business location, but they no longer appear to offset the negative aspects.
Need for political measures
If Germany is to continue to play a role in investment decisions, politicians and the administration must act urgently and create better framework conditions. Otherwise, there is a risk of considerable losses in prosperity in the medium to long term.
The results of the Kantar survey clearly show that Germany is facing considerable challenges as an industrial location. Rising costs, bureaucracy and a shortage of skilled labour are a burden on companies and are leading to an increasing migration of production capacities abroad. Rapid and effective political measures are needed to stop this trend and maintain Germany’s attractiveness as a business location. Germany as an industrial location, once hailed as one of Europe’s leading economic powers, is increasingly under pressure. A recent survey conducted by the market research institute Kantar Public on behalf of the management consultancy FTI-Andersch paints a sobering picture: a majority of the manufacturing companies surveyed now take a critical view of Germany as a business location. In particular, rising energy prices, increasing bureaucracy and the scarce availability of skilled labour are causing dissatisfaction.
The study, which surveyed 150 German companies from various branches of industry, revealed that Germany as an industrial location was only given an average score of ‘three minus’ (3.3). The areas of energy prices and availability as well as regulation and bureaucracy scored particularly poorly, each receiving a grade of 4.0. The availability of skilled labour is also perceived as inadequate with a score of 3.9. These results reflect the growing challenges that German companies are facing in the current economic environment.
Relocation of production capacities as an option
As a result of these negative developments, a quarter of the companies surveyed (26 per cent) are considering relocating production capacities and networks abroad. Asian countries are particularly popular, with 40 per cent of companies that have concrete plans to relocate preferring Asia as a target region. China in particular is seen by many as an attractive location, not least due to the targeted promotion of foreign investment by the Chinese government.
The fact that China is becoming more attractive as a location is also reflected in the general assessment of the companies surveyed: Every second company (50 per cent) considers China to be an attractive location for the coming years, with 8 per cent even rating China as very attractive. This development illustrates the increasing relocation of global production networks and the need for German companies to remain internationally competitive.
Germany is becoming less attractive
The majority of companies surveyed now see Germany as a less attractive (46 per cent) or even unattractive (15 per cent) location. The high energy prices and the complicated regulatory framework are seen as a particular hindrance. 39 per cent of companies stated that they rated the energy supply in Germany as inadequate or insufficient, while 34 per cent rated the availability of skilled workers and 31 per cent the bureaucracy negatively.
However, the proximity to relevant sales markets (score 2.4) and the infrastructure and transport links (score 2.5) were rated positively. These factors remain strong arguments in favour of Germany as a business location, but they no longer appear to offset the negative aspects.
Need for political measures
The results of the Kantar study clearly show that Germany faces considerable challenges as an industrial centre. Rising costs, bureaucracy and a shortage of skilled labour are a burden on companies and are leading to an increasing migration of production capacities abroad. Rapid and effective political measures are needed to stop this trend and maintain Germany as an attractive location, but it is not very likely that such measures will be implemented in the near future, as the political will to do so seems to be lacking! This is a great opportunity for Asian countries to offer their countries as attractive business locations for German companies!
