German chemical companies are increasingly turning to research and development (R&D) abroad due to more favorable conditions in other countries. Thomas Wessel, Chairman of the Research Committee at the German Chemical Industry Association (VCI), highlighted that lower costs, better public funding programs, and reduced bureaucracy abroad are driving this shift. “While ‘Made in Germany’ is top for ideas, these ideas are becoming ‘moneymakers’ abroad,” he said.
Despite a four percent increase in R&D spending last year, reaching approximately 15.5 billion euros, the VCI expects only a two percent increase for 2024. The rise in spending was largely driven by growth in pharmaceutical research.
Chemicals companies are scrutinizing their investments more closely. Wessel, who is also the Chief Human Resources Officer at specialty chemicals company Evonik, noted that high costs, poor profitability, and worsening innovation conditions are making it increasingly difficult to conduct research in Germany.
The VCI anticipates minimal growth in domestic research budgets this year, while foreign investments are expected to rise. According to a VCI survey, one-third of companies researching outside Germany plan to increase their research spending in those locations.
Currently, Germany is the fourth largest chemical research hub globally, behind the USA, China, and Japan, but its importance is diminishing. Wessel called for reductions in bureaucracy, simpler funding systems, and stronger STEM education to reverse this trend.
He pointed to the pharmaceutical industry as a positive example, citing recent investments by Eli Lilly, Roche, and Sanofi as evidence that effective government strategies can lead to favorable location decisions.
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