Investors don't trust Germany

The outflow of direct investment from Germany amounted to €94 billion in 2023 – the third highest figure since the beginning of statistics in 1971 (it was worse only in 2021-2022). Not only foreign investors are fleeing, even German companies are stopping investing in the country and, on the contrary, are expanding their business abroad.

As parties in Berlin argue about an “economic turnaround” or “accelerating reforms,” investors are increasingly losing confidence in Germany as a location. New data from the employer-linked German Economic Institute (IW), available to newspaper ‘Handelsblatt’, paints a worrying picture for Germans.

The outflow of direct investment from the Federal Republic continued at a high pace. After rising to record levels in 2021 and 2022, net outflows weakened in 2023 to €94 billion. Internationally, outflows were higher only in Japan.

“Germany is losing more and more ground in the competition,” warns IW director Michael Hüther. “High costs, exhausting bureaucracy and broken infrastructure will make foreign companies think twice about investing in Germany.”

The federal government is also alarmed. “Too little is being invested in Germany as a location,” Finance Minister Christian Lindner (FDP) told Handelsblatt. The attractiveness of the location has been “ignored in the past.”

For example, the chemical giant BASF is directing its main investments to China, while its production in Germany continues to decline. The concern stated that the industrial complex in Germany is unprofitable, so several more factories will soon be shut down.

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