Foreign investment in Germany at lowest level since 2013
Current status
Foreign investment in Germany reached a historic low since 2013 in 2023. It is well known that investment plays an important role in economic growth. If foreign investment falls, this can lead to a downturn in the economy and, in the long term, to more serious consequences for the German economy. But what are the reasons for the decline in investment and how can we prevent it? In dem Artikel wird untersucht, welche Faktoren dazu beitragen, dass die ausländischen Investitionen niedrig bleiben und was getan werden muss, um sie zu erhöhen. These include the development of regulatory standards and reforms of the labor market and tax system.
The reasons for the decline in foreign investment
For some time now, the number of foreign investments in Germany has been at a historically low level. The reasons for this are manifold and there is no simple explanation for the decline. However, some experts point out that ongoing political uncertainties, the increasing cost of real estate and the rising cost of infrastructure projects have contributed significantly to this development.
While Germany undoubtedly remains a strong and competitive location, said Henrik Ahlers, chairman of the management board at EY. “But on the cost side, Germany has recently become much less attractive – especially for industrial companies.”
Other locations are also currently better positioned in terms of research, development and digital innovations. Other locations are also currently better positioned in terms of research, development and digital innovations.
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The consequences of the decline in foreign investment
The decline in foreign investment in Germany proved problematic last year. Experts say the returns and jobs associated with these investments have had a significant impact on the German economy.
An analysis of data from the Federal Statistical Office shows that foreign direct investment (FDI) declined by 0.9 percent in 2023. This represents the lowest level since 2013. The biggest decline was in M&A transactions, down 22 percent year-on-year.
This development has negative consequences for the German economy: there is less value creation and fewer jobs. Because foreign investors often buy more energy-efficient equipment than domestic companies, productivity growth may slow. Trade with foreign countries is also deteriorating and exports are falling.
In addition, it has become more difficult to bring new technologies into the country or to develop new business models. Without the input from abroad, it is more difficult for entrepreneurs to implement innovative ideas and thus attract more employees.
France remains at the top
According to the study, France remains the front-runner in the European ranking, where development has been much more dynamic than in Germany for several years. For example, the number of investment projects in the neighboring country rose by three percent to 1259 last year, after increasing by as much as 24 percent in 2021. The United Kingdom ranks behind, although the number of projects fell by six percent to 929.
“France in particular has left Germany behind in recent years,” Ahlers said. President Emmanuel Macron has managed to “ignite momentum” with pro-business reforms, he said. Germany is currently a long way from achieving this.
In contrast to the weakening trend in Germany, foreign investment activity increased slightly throughout Europe. In 2022, the number of announced projects increased by one percent to 5962. The biggest percentage winners, he said, were Poland, Portugal and Turkey. The biggest percentage winners, he said, were Poland, Portugal and Turkey. The number of projects was down seven percent from 2019. No information was provided on the amount of the investment.
Germany nevertheless a top location
However, in a global company survey conducted for the EY study, Germany is currently becoming significantly more attractive. The proportion of respondents who describe Germany as one of the top three locations in Europe has risen from 42 to 62 percent compared with the previous year’s survey.
France (47 percent) and the United Kingdom (43 percent) are well behind. “Last year, there were concerns about an acute energy crisis and production losses in Germany,” Ahlers said. “Last year, there were concerns about an acute energy crisis and production losses in Germany,” Ahlers said.