Germany Is Losing Ground in Foreign Investment

Germany Is Losing Its Appeal

Germany is coming under increasing pressure as a business location in international competition. According to recent analyses, the number of foreign investment projects in Germany fell again in 2025. This continues a trend that now goes well beyond ordinary economic weakness.

According to EY, only 548 foreign new investment and expansion projects were recorded in Germany in 2025. That was 10 percent fewer than in the previous year and the lowest level since 2009. Since the record year of 2017, the number of foreign investment projects in Germany has fallen by more than half.

Germany may still formally remain one of Europe’s most important investment locations. But the gap to other countries is widening. France and the United Kingdom continue to rank ahead of Germany in the European comparison, while countries such as Spain and Turkey have recently gained ground. The message is clear: Germany is not only being hit by global uncertainty, it is also losing structural weight in the competition between business locations.

High Costs Are Driving Companies Abroad

At the same time, German industrial companies are increasingly investing outside Germany. According to the Association of German Chambers of Industry and Commerce, 43 percent of industrial companies are planning foreign investments in 2026. The motive behind this development is particularly problematic: increasingly, the main reason is no longer access to new sales markets, but cost reduction.

41 percent of companies cite cost savings as the main reason for investing abroad. That is the highest level since 2003. High energy prices, rising labour costs, tax burdens, lengthy approval procedures and bureaucratic hurdles are weakening Germany’s competitiveness.

For Germany, this development is highly sensitive. Foreign investments were long not automatically seen as a weakening of the domestic business location. When companies expand abroad to develop markets or build sales channels, this can also help stabilise jobs and value creation in Germany. But this positive feedback effect is now increasingly being lost.

A Warning Signal for Jobs and Value Creation

This becomes particularly clear among companies that invest abroad for cost reasons. According to DIHK, 47 percent of them are planning to reduce employment in Germany. 44 percent intend to scale back domestic investment. This turns international expansion into a structural problem for Germany as a business location.

Germany is not only at risk of losing capital, but also industrial substance. If investment, production and employment increasingly emerge where costs are lower, procedures are faster and conditions are more reliable, value creation will shift permanently.

The latest figures therefore fit into a broader debate about Germany’s economic situation. For years, companies have complained about high location costs, slow digitalisation, complicated procedures and a lack of planning security. The investment data now show that this criticism is not merely sentiment, but is reflected in concrete business decisions.

Pressure for Reform Is Growing

The figures are increasing the pressure on the German government to noticeably improve business conditions. Companies and industry associations are calling for faster approval procedures, more competitive energy prices, tax relief and a consistent reduction of bureaucracy.

The message from the data is clear: Germany is not simply going through a weak phase. The country is losing appeal in the global competition for investment. Without tangible reforms, this development could become further entrenched — with consequences for industry, employment and future value creation.

SK