Germany's chemical and pharmaceutical industry is investing billions - but where is the research?

Germany's chemical and pharmaceutical industry is investing billions - but where is the research?

Investments by the German chemical and pharmaceutical industry in research and development (R&D) are expected to reach 16.5 billion euros in 2025. This means an increase of 400 million euros compared to the previous year. Nevertheless, the Association of the Chemical Industry (VCI) warns of increasing pressure from international competition, especially from Asia, which seriously endangers Germany's future attractiveness as a location. However, despite challenges such as high energy prices and regulatory hurdles, the industry remains strong in research.

Thomas Wessel, Chairman of the VCI Research Committee, emphasizes that companies have not reduced their research spending, even in difficult economic times. However, this continuity of investment contrasts with the below-average development compared to other industrial sectors. Germany's attractiveness as a location is decreasing, which is encouraging the relocation of R&D activities abroad.

Hurdles and challenges

The main reasons for the declining attractiveness include tax disadvantages, slow approval processes and a shortage of skilled workers. These difficulties are driving companies to invest in countries such as the USA, Japan, China and South Korea, which offer more attractive conditions and attract both skilled workers and investments.

A worrying trend can also be seen in global patent applications: Germany has lost touch with its Asian competitors. In the current R&D landscape, the pharmaceutical industry accounts for over 60 percent of spending. This is supported by the warnings from the VCI, which points to a technological lag if the general conditions in Germany do not improve.

Long-term perspectives

Despite the challenges, companies like Bayer, Evonik and Merck are proving to be interesting long-term investment opportunities. These companies will continue to be strengthened through political support and targeted innovation policies in order to secure their leading position in global competition. Thomas Wessel also emphasizes that innovation leadership remains crucial for the industry.

In view of current developments, it is essential for Germany to face the challenges of international competition. Only through attractive framework conditions can the chemical and pharmaceutical industry continue to develop innovative solutions and survive in the global market. Further information on the competitiveness of the location can be found in the ifo.