German Businesses Weighing Domestic and International Commitments
German companies, spanning from specialized manufacturers to multinational chemical giants, are currently evaluating their operational footprints and investment strategies amidst a challenging economic environment. Reports indicate a continuing trend of some businesses either relocating functions or increasing their investments in foreign markets, while other data suggests a more nuanced picture.
For instance, Gardena, a garden tools specialist based in Ulm, has reportedly announced plans to reduce its domestic workforce by 250 positions, representing 10% of its German staff, with a partial relocation of operations to the Czech Republic. Similarly, global players like BASF are also focusing on international expansion, with plans to move service roles to India, potentially impacting jobs at its Berlin site.
Shifting Investment Patterns and Job Implications
The discussion around German companies' outbound movements gained significant traction last year. An analysis by the online magazine Finanzmarktwelt in November, citing Federal Statistical Office figures from 2018 to 2023 (with more recent data pending publication), highlighted a period of industrial change. Between 2021 and 2023, approximately 1,300 German companies with over 50 employees reportedly moved business functions abroad. This figure represents 2.2% of all companies of that size in Germany as of 2023 and is associated with an estimated loss of 50,800 domestic jobs. Concerns were raised that this trend could intensify due to Germany's elevated energy and labor expenses.
However, the state-owned development bank KfW has observed a contrasting trend. In June, its research department indicated a reduction in international engagement among many medium-sized companies. The number of German mid-sized firms active internationally reportedly decreased from around 880,000 in 2022 to approximately 760,000 a year later. Dirk Schumacher, KfW's chief economist, attributed this shift to various factors, including "geopolitical tensions in Ukraine and the Middle East, growing export competition from China in key industries and the protectionist trade policy of the United States," which have collectively worsened conditions for foreign trade.
Conflicting Perspectives on Outward Investment
A somewhat different perspective emerges from the Association of German Chambers of Commerce and Industry (DIHK). Based on its business climate survey from early 2026, DIHK spokesman Sven Ehling noted that cost pressures on German industry have reached unprecedented levels. This situation is prompting a significant number of companies to plan increased investments abroad. The DIHK's findings indicate that 43% of industrial companies intend to make foreign investments this year, a three-percentage-point increase from the previous year. Volker Treier, DIHK's head of international trade, stated, "The reasons are clear: rising costs, structural problems and weak economic conditions in Germany as a business location."
Evolving Motivations for International Investment
Historically, foreign investments by German companies often served to bolster domestic operations, frequently leading to increased employment at home. This was particularly true for investments aimed at market expansion or enhancing sales and customer service. However, the DIHK survey reveals a decline in the proportion of German companies investing abroad primarily for market development, dropping from 30% to 28%. Treier highlighted a shift in motivation: "Companies are now being forced to invest abroad primarily for cost reasons. This frequently leads to significant cutbacks at domestic sites." This suggests that foreign investment is increasingly becoming a strategy for cost reduction rather than solely for driving expansion.
Overall, the trajectory of foreign investment remains complex and not entirely unidirectional. Professor Steffen Müller of the Leibniz Institute for Economic Research Halle (IWH) suggests that direct investments abroad by German companies are "well below peak levels." Bundesbank statistics cited by Müller indicate annual transaction values of €120 billion between 2017 and 2022, while figures for 2024 stand at €80 billion and for 2025 at under €100 billion. These numbers, he contends, "give little reason to assume that significantly more capital is flowing out than in previous years."
Regional Shifts in Investment Destinations
The DIHK survey also points to notable changes in the preferred regions for German foreign investment. North America, in particular, appears to be losing some of its appeal, with the share of German companies planning investments there decreasing from 48% to 44%. Conversely, engagement in Asia is on the rise. The DIHK reports an increase in the share of industrial companies investing in China, from 31% to 34%. The broader Asia-Pacific region (excluding China) is also gaining importance, growing from 21% to 26%. Treier noted that "The tariff dispute with the United States is fueling uncertainty and causing companies to postpone decisions." Despite these shifts, the eurozone continues to be the most significant region for German corporate investment, attracting 64% of planned investments. The stability, common single market, and shared currency within the eurozone offer reliable conditions, which are particularly valued during periods of geopolitical uncertainty.
