Post-Brexit British investments have boosted FDI in Germany to record levels
Germany reached a record level of foreign direct investment last year, official statistics show, the boom was caused by an increase in the number of British companies in Europe’s largest economy to maintain their post-Brexit position in the EU.
FDI into Germany totaled 25.3 billion euros last year, which is a 261 percent increase compared to 7 billion euros in 2021. The largest source of investment was the United States, which reported 279 projects, followed by Switzerland and the United Kingdom. A total of 170 FDI projects from the UK is up 21 percent from 2021.
“It is particularly important for British companies to gain a foothold in the EU after Brexit,” said Robert Hermann, CEO of Germany Trade & Invest (GTAI). About a third of the projects announced by British companies were in financial services, and 21 percent were in IT, the economic development agency announced.
One of the biggest British investments was made by Frasers Group, owner of Sports Direct and other high-street brands, which announced last April that it would spend €300 million on a new distribution center at Bitburg Airport in western Germany. European headquarters.
The English company Mura Technology announced last year that it would build one chemical recycling plant in the eastern city of Böhlen, which would turn 120,000 tons of plastic waste into oil per year. Proton Motor Power Systems also said it is expanding its plant in Puchheim, southern Germany, which produces fuel cell stacks and hydrogen fuel cell engines.
And THEMPC, a promotion and branding company, has set up an operations center in Munich. It allows the company to produce and distribute printed products and custom packaging within the EU without customers having to pay additional duties and taxes.
British companies setting up shop in Germany have been attracted by the country’s traditional strengths in cars, manufacturing and logistics, according to GTAI officials.
While FDI into Germany peaked last year, officials expect total volumes to decline this year as President Joe Biden’s deflationary law lures investment in green technologies from Europe to the United States.
“When it comes to new decisions, the numbers go down,” Hermann said. “The trend we’re seeing is that there will be fewer of them.”
He identified the IRA as a potential factor. “We assume that this will affect investment in Europe and Germany,” he said.
Germany attracts semiconductor and battery companies and is a beneficiary of EU plans to boost the bloc’s self-sufficiency in key technologies and its resilience to potential disruptions to Asian supply chains.
Much of the increase in FDI comes from US chip maker Intel’s plan to build a €17 billion factory in the eastern German city of Magdeburg, and Swedish startup Northvolt’s €4.5 billion investment in a new battery factory in the northern region. State of Schleswig-Holstein.
But even without Intel’s contribution, FDI would have amounted to 8.3 billion euros, higher than in 2021.
According to Hermann, investors are attracted to Germany by the size of Germany’s market, secure legal framework, highly qualified workforce, infrastructure and R&D environment. By project type, 35 percent of the investments were directed to sales, marketing and support, 25 percent to business services, and 15 percent to production and R&D.
GTAI numbers are a lagging indicator. Last year’s massive energy price hikes caused by Russia’s war in Ukraine have made Germany a much less attractive place to do business than it was before the invasion. While gas prices are now close to pre-war levels, many companies are still looking elsewhere, especially in the United States. The IRA provides $369 billion in subsidies and tax credits for clean energy technologies.
Hermann says energy prices have played a role for large international investors, but other factors are more important. “Not all projects are energy intensive,” he said. “A lot of it is personnel costs and that [proximity] important to R&D partners, suppliers and customers.”
The agency noted that investment from China is on the decline, with just 141 projects announced last year, the lowest figure in eight years. Despite the decline, China was the fourth largest foreign investor.
Some experts attribute the decline to tighter restrictions on mergers and acquisitions by Chinese companies in Germany. However, Hermann blamed the fall on the aftermath of the Covid-19 pandemic, which made it difficult for Chinese leaders to travel to Germany.