Skip to main content
Contact
Submit RFP

      Germany remains a key business location in Europe due to its market size, public safety, political stability and innovative strength; however, from the perspective of international investors, it is under considerable pressure to reform. This is a key finding of the latest edition of our study series “Business Destination Germany”. A clear trend is emerging – Germany is increasingly falling behind in a comparison with other EU countries.

      The study is based on a survey of 400 Chief Financial Officers (CFOs) from the largest German subsidiaries of international corporations in the eight most important investor countries. The respondents see new opportunities and, in times of geopolitical disruption and uncertainty, attest that Germany has the foundations for a comeback among the leading business locations. However, to secure confidence, investment and thus growth, structural and sustainable improvements to the framework conditions for businesses in Germany are now essential.

      Ready to talk? Contact us

      To compare Germany’s position as a business location across the EU, KPMG launched a location index at the start of its 2017 study series, which takes more than 20 factors into account. This location index had already shown a steady decline in previous years – and reached a new low in 2026: On a scale ranging from +10 (top of the 27 EU countries) to -10 (bottom of the 27 EU countries), it fell from +3.1 points (2017) via +2.6 (2019), +2.4 (2021) and +1.2 (2023) to now +0.2. This means that Germany is now only just above the EU average of all 27 EU countries.

      auto_stories

      The results of our survey of 400 CFOs at international companies in Germany reveal a continuing downward trend in key location factors, but also point to new areas of business opportunity. We analyse the figures and highlight the key areas for action.

      Download now

      Advantages and disadvantages of the location

      control_point

      Location advantages: Where Germany really stands out

      • A secure environment for long-term investment – 66 per cent of CFOs at international companies rank Germany’s public safety among the top five in the EU, whilst 65 per cent cite its political stability. These are the highest ratings in the entire ranking.
      • Innovative strength – 57 per cent of respondents cite the size and purchasing power of the market, 52 per cent the research landscape, and 54 per cent the innovation-friendly environment and openness to technology as positive factors.

      These positive factors, among others, mean that 60 per cent of international companies currently use Germany as their European headquarters, whilst 63 per cent also manage activities outside Europe from Germany. Another positive aspect is that 51 per cent rank Germany in the top five across the EU for quality of life and standard of living. However, in 2023, this figure stood at 74 per cent.

      “Companies plan their investments for the long term – which is why security and political stability are of paramount importance. The more uncertain the geopolitical situation becomes, the more relevant Germany becomes.” 

      Andreas Glunz, Executive Board Member for International Business, in the Handelsblatt

      remove_circle_outline

      Location-related disadvantages: Where Germany has some catching up to do

      • Bureaucracy: 70 per cent rank Germany among the five weakest EU countries in terms of regulation, with 29 per cent even placing it last. This figure shows the sharpest decline of all factors. 32 per cent therefore call for a reduction in bureaucracy, but only 19 per cent expect progress in this regard over the next five years.
      • Energy costs: Energy supply at competitive prices was surveyed separately for the first time – and the verdict is clear: 43 per cent rank Germany as the weakest location in the EU, with a further 26 per cent placing it among the five weakest.
      • Digital and physical infrastructure: 69 per cent of CFOs rank digital infrastructure among the five weakest in Europe, with 33 per cent even placing it at the bottom of the list. When it comes to physical infrastructure, only 29 per cent still rank Germany among the top five (2017: 77 per cent, 2023: 44 per cent).

      Furthermore, 47 per cent of respondents rank Germany among the five countries with the highest taxes and the greatest tax complexity (+12 percentage points compared to 2023), 19 per cent even see the country as bringing up the rear in an EU comparison. Immigration policy is also viewed more critically: only 24 per cent see Germany as a leader (2023: 44 per cent), whilst 45 per cent rank it among the five weakest (2023: 17 per cent).

      “Automation and digitalisation will cause energy demand to rise even further in the future. This makes energy costs a key factor in decisions on where to locate a business – and undermines Germany’s appeal.”

      Andreas Glunz, Executive Board Member for International Business, in the Börsen-Zeitung

      Where international investors see the greatest opportunities

      • The German government’s reform agenda

        The German government’s reform agenda has a greater influence on the investment decisions of international companies than current sentiment would suggest: for around one in five international companies (19 per cent), it is one of the three most important reasons for investing in Germany over the next five years.

      • Opportunities in the major transformation challenges

        17 per cent of CFOs see opportunities in the country’s major transformation challenges – in particular the energy transition, climate neutrality, digitalisation, demographic change and strengthening defence capabilities.

      • Infrastructure and Defence Package

        A further 17 per cent cite the new infrastructure and defence package as an incentive for investment. As a result, 48 per cent of the companies surveyed expect their economic situation in Germany to improve over the next five years.

      Overall, this suggests that decisions shaping economic policy are of the utmost importance. Andreas Glunz: "Germany remains a key location for international companies, but investors’ patience is running out. The question of whether reforms will take hold or whether creeping deindustrialisation will continue is being decided right now."

      Germany remains a key location for international companies, but investors’ patience is running out. The coming months will determine whether reforms take hold or whether the creeping deindustrialisation continues.
      Andreas Glunz
      Andreas Glunz

      Bereichsvorstand International Business

      KPMG

      Further insights

      Your contact

      Andreas Glunz
      Andreas Glunz

      Managing Partner International Business

      KPMG AG Wirtschaftsprüfungsgesellschaft