Germany as a Business Location – Challenges and Advantages

On the one hand, Germany is over-regulated, its tax burden is too high, the language is difficult to learn, and energy costs and the transition to clean energy can be obstacles. On the other hand, Germany is a huge, economically stable market with qualified personnel, innovative strength, excellent R&D, consistent regulations and an effective legal framework conditions work – and which offers great potential.  

Those are the key findings of the representative survey by Germany Trade & Invest – Germany’s international business promotion agency – of more than 1,800 companies from the UK, France, the US, Japan and South Korea. 

“There has never before been such a broad and comprehensive study on Germany as a business location,” says Germany Trade & Invest CEO and Chairwoman Julia Braune. “For us as an economic promotion agency, it was important to find out how foreign companies really see Germany as an investment location. What’s important to them when looking for a new location and what is not. It’s exciting to see how different the views are depending on the country or region. “  

When choosing a location,  the most relevant factors for companies from the UK are digital infrastructure, for companies from the US a high quality of life, and for companies from South Korea and Japan, a stable economy. 

The companies surveyed most frequently mentioned cost structure and cost reduction potential, economic stability and economic potential, the legal framework and regulations, infrastructure, logistics network and supply chains, and the availability of qualified personnel, as well as market size, market potential and the number of potential customers as decision criteria for choosing a location abroad. 

“For many of the companies, the criteria for selecting a location match the strengths they attribute to Germany,” Braune explains. “That’s a very good sign. From the perspective of the companies surveyed, the high operating and wage costs, the linguistic and cultural differences, bureaucratic overregulation, and the high tax and duty burden are more problematic.”  

Respondents said the most important factors for living abroad were hospitality, openness and integration opportunities, economic conditions and personal security. Other criteria included climate and environmental factors, working conditions, and culture, customs and traditions, as well as the local cost of living. 

In terms of Germany's image as a business location, the study highlighted Germany’s infrastructure and a stable economy as the most positive qualities. Germany scored less well on the issues of wage and energy costs, bureaucracy and taxes. 

“No business location in the world is perfect – that’s true of Germany too,” says Braune. “As an investment location, we are doing well in global competition. But of course there are also major challenges that we have to face. Our task now is to continue adapting our information and services to the needs of companies and convince them to expand to or within Germany,”  

Germany Trade & Invest (GTAI) is a government agency that informs German companies about foreign markets, promotes Germany as a business location and supports foreign companies in setting up shop in Germany. All GTAI services come free of charge.