Germany is undergoing a transformation process on an unprecedented scale. Do international investors see this as an opportunity? And how do they rate Germany's competitiveness as a business location compared to other EU countries? We have analyzed this in our fourth edition of our "Business Destination Germany" survey. To this end, we once again asked 350 CFOs of the largest German subsidiaries of international corporations from the most important investor countries how they rate Germany as a business location.
Even though Germany beats the EU average in the majority of location factors and shows confidence in the long term: The results of the survey are worrying from a German perspective in view of the continuous downward trend that has been evident since the start of the survey series in 2018.
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Business Destination Germany 2024 - How international investors rate Germany as a business location.
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Andreas Glunz
Managing Partner International Business
KPMG AG Wirtschaftsprüfungsgesellschaft
Long-term outlook remains positive: investors want to participate in the transformation process
On a positive note, more than one in two of the companies surveyed (52%) recognize business opportunities arising from Germany's major transformation tasks. These include, in particular, the energy transition towards renewable energies, the fundamental achievement of climate neutrality in all sectors and areas of life, the digitalization of the economy, administration and healthcare, overcoming the challenges of an ageing society and creating the country's defence capability. They therefore want to invest in Germany over the next five years: 37% of companies plan to expand their presence, while only 7% want to reduce it.
It is also clear that in an EU comparison, Germany is still at least in the upper midfield for the majority of location factors. The best ratings were given for the central logistical location (79% rank Germany among the top 5 in the EU), the standard of living (72%, a drop of nine percentage points compared to 2022) and public safety (69% / minus eleven percentage points).
Reasons to invest in Germany over the next five years
International investors recognize need for action in Germany
A major finding: Germany's attractiveness is declining significantly. The KPMG Location Index, for which 23 location factors are evaluated, has a value of just +1.2 on a scale of +10 (top of the EU comparison) to -10 (bottom of the EU comparison). This corresponds to a halving compared to the previous edition of the survey in 2022.
It is recognizable that the continuous negative trend since the first edition of the survey in 2018 has now intensified. The ratings between 2022 and 2024 were significantly worse than between 2018 and 2022. Germany is now only in the EU midfield in several categories - and is already below the EU average in terms of the degree of digitalization of public administration, the availability of skilled workers and the promotion of business relocations, among other things.
As the third-largest economy in the world and also the EU country with by far the largest economy and population, Germany should be aiming to be at least in the top 5 in all relevant location factors in an EU comparison.
Currently, 46% of the CFOs surveyed consider other countries and regions to have stronger growth than Germany. They are therefore considering investing there as a priority in the next five years.
These are the biggest obstacles to investment over the next five years
Percentage of individual aspects mentioned in the survey
Excessive bureaucracy
High energy costs
Lack of digitization
We have lived on substance for too long and neglected important reforms. Almost one in two international CFOs (46%) currently rate other countries and regions as having stronger growth. They will prioritise new investments there in the next five years.
