The number of industrial companies considering relocating from Germany is steadily rising, according to a new survey. The situation is particularly dramatic among large companies, with anger directed at the current government coalition. The criticism centers on the lack of solutions in the crucial issue of location.
Germany’s energy policy is increasingly becoming a risk to business locations. The number of industrial enterprises contemplating production cutbacks or moving abroad is growing continuously. This is evident from a recent survey conducted by the Association of German Chambers of Industry and Commerce (DIHK) among approximately 3,300 member companies.
The findings of this year’s “Energy Transition Barometer” also reveal dramatic developments in other areas. “The trust of the German economy in energy policy has been severely damaged,” summarized Achim Dercks, Deputy Managing Director of DIHK, regarding the survey’s outcome. “While in the years before 2023, many companies also saw opportunities in the energy transition for their own operations, risks have recently come to dominate from their perspective.”
Energy-intensive companies are particularly driven to relocate or reduce production. Currently, 45% of companies with high electricity costs are “planning or implementing” such steps—an increase of seven percent from last year. In the survey, electricity costs are considered “high” if they account for more than 14% of revenue.
The situation is even more alarming for large companies in the manufacturing sector. Among industrial firms with more than 500 employees, 51% are already planning to scale back production or relocate. Last year, this figure was 43%. This is particularly concerning as these large companies are often well-established internationally, making it easier for them to carry out relocation plans.
“The deindustrialization of Germany has begun, and it feels like no one is doing anything about it,” quotes the DIHK from the survey, referring to a comment from a West German industrial company.
Habeck and Scholz under criticism
Although the federal government recently presented a “Growth Initiative” plan in response to the weakest economic forecasts in Europe, it failed to offer “sustainable solutions for the energy supply and energy pricing issue,” criticized Dercks. For many industrial companies, this is currently the critical location issue, stated the DIHK vice president: “If you don’t have this on your radar, you may soon only be able to watch the deindustrialization of our country.”
Dercks also criticized the government for not taking the concerns of small and medium-sized enterprises (SMEs) seriously. He referenced Chancellor Olaf Scholz (SPD), who has repeatedly echoed the old Hanseatic saying that “complaining is the merchant’s song,” much to the dismay of business owners.
Both Scholz and Federal Minister for Economic Affairs Robert Habeck (Green Party) often point out that energy prices have significantly decreased since the record highs following the Ukraine war, citing specific spot market prices or new customer tariffs. However, these have little relevance to the long-term cost burden and investment security of companies.
Dercks pointed out that electricity prices on the futures market are still twice as high as before the crisis, while gas prices are four to five times higher than in the United States. Against this backdrop, it is unacceptable for government representatives to obscure the true situation with selected spot market prices, said the DIHK vice president: “Such tricks are infuriating businesses.”
In the survey, more than a third of industrial companies reported that they are currently unable to invest as much in their core operations due to high energy prices. A quarter stated that they can no longer engage in climate protection initiatives to the same extent. Additionally, a fifth of the companies had to postpone investments in research and development. Overall, two-thirds of industrial companies see their competitiveness at risk.
“In addition to the planned relocation of production, there is another acute threat to Germany’s industrial base,” commented Dercks: “When companies stop investing in their core processes, it amounts to a gradual rollback.”
How many companies have actually implemented their relocation plans could be the subject of next year’s survey, Dercks announced.
DIHK presents a list of ten proposals
Regarding specific energy policy obstacles, most companies cited excessive bureaucracy and a lack of planning certainty. For example, it remains unclear where the hydrogen that is supposed to replace natural gas in industry will come from. There are also doubts about the so-called power plant strategy of the Minister of Economic Affairs. “No one believes anymore that coal-fired power generation will be phased out by 2030—not even the people in charge,” said Dercks.
“The brakes on growth caused by energy policy can only be resolved through a change in thinking,” said the DIHK vice president: “Companies need a sustainable perspective for reliable energy supply at competitive prices now.” For around 80% of businesses, “further reductions in taxes and levies on electricity prices” is a central demand.
In addition, the DIHK presented a list of ten proposals that could be implemented quickly to improve the situation. These include accelerating grid expansion to use renewable energy more efficiently. At the same time, grid fees should be reduced through subsidies from the federal budget.
The expansion of renewable energy should also no longer be subsidized based on the energy produced but should be supported through investment grants. The federal government must also make its hydrogen import strategy “credible,” according to the DIHK paper.
The survey, conducted between June 10 and 30, reflects the “entire breadth” of the German economy, according to the DIHK. A total of 3,283 companies participated, including 56% from the service sector, followed by industrial companies with 23%, trade with 14%, and the construction industry with 6%.
Responses came from 36% of companies in western Germany, 28% from the south, 19% from the east, and 16% from the north. “The aggregation at the federal level is based on regional and sectoral weighting, which is based on employment figures in the regions,” the DIHK stated regarding the methodology.
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