Energy costs, uncertainty fuel German industry plans to cut or relocate production – survey

Four in ten industrial companies in Germany are considering production cuts in the country or relocating parts of their production capacities outside of the country due to uncertainties regarding energy policy and high energy prices, found a survey by the Association of German Chambers of Industry and Commerce (DIHK). About 37 percent of the 3,000 companies surveyed said they have considered such steps, compared to 32 percent in 2023 and 21 percent in 2022. Energy-intensive companies showed greater openness, with 45 percent of such companies saying they would consider it. For large companies with more than 500 employees, 51 percent said it could be an option.

“The trust of the German economy in energy policy is severely damaged,” said Achim Dercks, deputy head of the DIHK. Policymakers have so far failed to provide companies with a clear perspective for a reliable and affordable supply of energy in the future, Dercks argued, adding that more and more businesses now perceive the energy transition as a threat rather than an opportunity. Asked how they view the energy transition’s impact on their competitiveness, respondents on average replied negatively, with energy-intensive companies holding more negative views. “Companies continue to see many more risks than opportunities,” said Dercks, arguing that the government had so far failed to properly address fears that have rapidly increased since the energy crisis in 2022. “For many industrial companies this is the decisive question of the moment,” argued Dercks. He warned that Germany might find itself at the onset of a lasting deindustrialisation if no countermeasures are taken. Many of the surveyed businesses said that the high energy prices are preventing investments in climate action, research and other areas. Bureaucracy and a lack of planning security were given as major factors that negatively influence the mood among companies, according to the survey.

The energy crisis in 2022, which saw unprecedented price hikes across Europe especially for natural gas, hit Germany's economy hard at a time when the country was emerging from the coronavirus pandemic and faced the challenge of Russia's war on Ukraine, wich exacerbated energy supply concerns. While gas prices have gone down markedly from their peak in late 2022, they still remain above the long-term average and continue to hamper a full recovery of Germany's industry and economy. The government of chancellor Olaf Scholz has enacted a wide range of measures to bring down prices, reduce bureaucracy and spur industrial recovery. However, industry representatives have argued these still fail to address underlying challenges and take too long to implement to lead Europe's largest economy out of its current slump.