Energy crisis taking toll on Germany's attractiveness as industrial location – report

Germany has slipped to one of the last places in an index ranking industrialised countries for their attractiveness as a business location, a report found. The country slipped four places to rank 18 in the Country Index of Family Business since 2020, when the last report was published, with only Hungary, Spain and Italy behind. The energy crisis and structural failures were the main reasons for the country’s drop in the ranking, in addition to too much bureaucracy, a high tax burden, high energy costs and a shortage of labour, the report by the economic research institute ZEW  found. “While other countries are investing in infrastructure or reforming their tax systems, Germany is not making any headway,” the lobby organisation for large family-owned corporations said.

The findings on Germany's position offer “considerable cause for concern,” report author and economist Friedrich Heinemann said. “The current crisis should be seen as an opportunity to turn things around, especially to reduce crippling regulatory burdens,” write the study authors. Six location factors were assessed for each country: tax burden, labour costs and productivity, effort and costs of state regulation, financing conditions for companies, quality of infrastructure and public administration, and energy supply and costs. “Germany has dramatically lost quality as an industrial location,” Rainer Kirchdörfer, head of the Family Business Foundation, said. “Ranked at the bottom of an international comparison - that's not the field we belong in.” The U.S., Canada, Sweden and Switzerland lead the index, which is published every two years. Since its inception in 2006, Germany has lost six places.