Europe’s largest economy, which is already in choppy waters, appears to be headed for worse times as it rapidly loses its attractiveness as an industrial location. Germany’s sky-high energy prices, precipitated by a lack of cheap natural gas and improvident anti-nuclear and ‘green’ energy policies enacted by the left-liberal government, have had a devastating impact on the country’s industry, according to a new study.
The study, carried out by the consulting firm Deloitte with the support of the Federal Association of German Industry revealed on Tuesday, November 14th, that two-thirds of German companies surveyed had already relocated parts of their value-added chain abroad, the Berlin-based daily Die Welt reported.
So far, the changes have centered around component manufacturing but planned relocations increasingly affect “higher value-added parts” such as pre-assembly and actual production.
As per the study’s findings, the primary motives for companies investing outside of Germany are lower energy costs (59%), lower wages (53%), a better market environment (51%), and less bureaucracy (50%). Factors such as access to raw materials, better investment conditions or subsidies, good logistics connections, and the availability of qualified workers played less of a role.
Mechanical engineering and the automotive industries have mainly relocated to Asia and the United States as well as Hungary, while other sectors are moving to other EU countries, namely Poland, Romania, and the Czech Republic, among others.
According to Deloitte, its study surveyed 108 “supply chain managers” in large companies (83%) and small and medium-sized companies (17%).
Adding to the worries about the German economy in general, figures released Tuesday, November 14th, by the Federal Statistical Office revealed that an increasing number of companies operating in the country are going bankrupt. The data showed that in October, the number of companies that filed for insolvency increased by 22.4% compared to the previous year. To date, most bankruptcies are in the transport and warehousing sector, followed by other economic services, including staffing agencies.
In September, Germany witnessed a 19.5% uptick in bankruptcy filings by companies, and since June, there have been consistent double-digit increases compared to the number of business insolvencies filed last year.
Meanwhile, major companies across various industry sectors, including but not limited to those in pharmaceutical, automotive, telecommunications, and retail sectors, are reportedly looking to reduce their workforces to save on costs. Bayer, Volkswagen, and Deutsche Telekom, all of which are among Germany’s 20 largest companies, plan to cut jobs, according to a report from Apollo News.
Deutsche Telekom is expected to eliminate some 2,000 positions, while Volkswagen, Germany’s largest company, is set to lay off some 5,500 employees.
