Germany’s Future as a Location for Industry in Question

Germany's future as a centre for industrial production is being put to the test, as the latest country index by the Foundation for Family Businesses shows. Compared to other OECD countries, Germany’s performance remains disappointing: While Denmark and Sweden now occupy the top spots, Germany ranks far behind. The authors of the country index urgently recommend comprehensive reforms, including the reduction of regulatory burdens, an investment-friendly tax system and priorities for infrastructure and education in public budgets.

Germany achieves good results in only one of six indicators, namely financing. But the country has clearly fallen behind regarding taxes, labour costs and regulation. Especially the high tax burden is a problem since many other location factors are not really attractive either. It is worth noting that the top performers Denmark and Sweden are small EU countries. Compared to Germany, both countries rely more heavily on market-oriented approaches, which gives them an edge in climate policy and the labour market.

Despite an improvement, the energy sector continues to impair Germany’s attraction as an industrial location as electricity and gas prices remain high. The results of the country index demonstrate the challenges facing German family businesses, which are currently reflected in staff cuts and weak investment activity.