Germany in crisis: Foreign investments fall to record low!

Germany in crisis: Foreign investments fall to record low!

Germany is increasingly becoming less attractive as a business location for foreign investments. According to a report by ZDF The number of foreign investment projects in 2024 fell by 17 percent compared to the previous year. This marks the seventh consecutive decline and results in a 46 percent decline compared to the record year of 2017. No other major European location has recorded such a drastic decline.

The decline in foreign investment in Germany is alarming and is linked to various factors. High tax burdens, high labor costs and expensive energy are cited as the main causes. In addition, a crippling bureaucracy and a weakening economy lead to a pessimistic economic outlook. The federal government has lowered the economic forecast for 2025 and no growth is expected.

Competitiveness in international comparison

In a European comparison, the decline in foreign investment projects was only 5 percent. In Germany the numbers fell to 608 projects, the lowest level since 2011. While France and Great Britain also recorded declines, Spain and Poland reported increases of 15 and 13 percent respectively. According to information from EY Despite a decline of 14 percent, France remains at the top of the European ranking with 1,025 projects.

Particularly noteworthy is the decline in American investment in Germany, which fell by 27 percent last year. Simone Menne, President of the American Chamber of Commerce in Germany, expresses concerns about Germany's competitiveness in the international context. The US Inflation Reduction Act increases competition by granting significant tax credits for investments in the US. Companies like Intel have already reconsidered their plans and a planned 30 billion euro location in Magdeburg has been put on hold.

Strategies to revive investments

The industry in Germany continues to be confronted with difficult conditions and an ongoing automotive crisis. Professor Serden Ozcan has noted that Germany is increasingly no longer the default destination for international investment. This could be a sign of a potential erosion of international trust in Germany's competitiveness. It remains to be seen whether the new federal government can provide attractive incentives with its planned investment package worth millions to strengthen the location and promote digitalization.

Despite the decline in foreign investment, there are also positive developments. In the same study, Germany learns that Chinese companies remain stable with 96 investment projects, making them the largest investor ahead of the USA (90 projects). This shows that Germany continues to be a preferred location for investments from China, with 37 percent of projects in Europe.

In view of current developments, the situation is also appealing for German companies, as they have increased their investments in other European countries by 2 percent to 633 projects. In Eastern Europe in particular, investments by German companies increased by 22 percent to 214 projects.