More German companies want to invest abroad to cut costs

BERLIN (Reuters) – A growing number of German companies are looking to invest abroad because of high costs of doing business at home, a survey of 1,900 companies by the German chamber of commerce DIHK showed on Tuesday.

While the number of companies planning to invest abroad rose to 42% from 41% last year, that share is low by historical standards. What stands out, however, is that 35% cite costs as their main motivation.

“The last time such a high figure was recorded was in 2008,” said Ilja Nothnagel, member of the DIHK executive board.

That figure is even higher, at 37% for companies with fewer than 200 employees.

“This is an alarming signal and shows that Germany needs to become more attractive again as a production location,” he said, citing high costs, geopolitical uncertainty, digitalisation and high energy prices as factors driving the trend.

Caution is also evident in plans for existing foreign investments. Only 30% of the surveyed companies are planning to expand them, while 23% plan cuts.

The ongoing diversification and reorganisation of supply chains are evident in the preferred regions of foreign investment.

The Asia-Pacific region, excluding China, continues to gain in importance, with 32% of the companies with plans to invest there, up from 29% in 2023.

While the euro zone continues to be the primary investment destination for German companies, its significance has diminished slightly, with 65% of the surveyed companies planning to invest there, compared with 71% last year.