Hannover Messe: Industry sees dangers for Germany as a business location

Concerns about Germany as a location are growing in industry, but some are (even) less concerned and others are very concerned. Siegfried Russwurm, President of the Federation of German Industries (BDI), is very worried. “Germany as an industrial location is in a critical phase. German companies are now thinking three times longer where to invest, and many are looking specifically at North America,” said Russwurm on Monday in Hanover.

With the Inflation Reduction Act, the US government is showing how easy it can be to promote climate-friendly technologies with a pragmatic approach and to ensure a high level of investment security. “If it is no longer worthwhile for companies to invest in traditional German locations, that should worry us.” According to Russwurm, companies’ investment behavior is an early indicator of the country’s economic future.

He is the first lobbyist to comment on the situation in the industrial nation on the first day of the Hanover Fair. It’s a bit like speed dating with lobbyists. A total of 90 minutes, half an hour for each of the three. Russwurm speaks first, he represents the entire industry, including those parts of the manufacturing sector that are not in Hanover at all. Then Karl Haeusgen, entrepreneur and president of the mechanical engineering association VDMA, and then Gunther Kegel, who is CEO of Pepperl + Fuchs and president of the electrical and digital association ZVEI, speaks. They agree on many lawsuits, and they are not necessarily new either: too much bureaucracy, too long approval times, too high taxes and workers, not just specialists, are all missing.

Everyone relies on globalization. “A large part of our strength comes from globalization,” says Russwurm. And all lobbyists warn against a decoupling from China, they prefer to talk about it, like Chancellor Olaf Scholz did on Sunday at the opening derisking. “There are risks,” says Russwurm, “but I don’t see what could be better if you stop doing business in China out of sheer fear.” That’s how the other lobbyists see it too: “If I’m supposed to make a product with only raw materials from Germany and Europe, I’ll fail,” says ZVEI man Kegel.

“False Security”

VDMA President Haeusgen does not see any de-industrialization in mechanical engineering. This is also shown by a survey among the members: four out of five companies have no thoughts of relocation. In electrical engineering, too, there are currently no concrete migration movements due to the low energy intensity, says Kegel. But that might just be a false sense of security, he immediately adds. “Companies decide small things every day.” If these small things are consistently directed against a location, at the end of two or three years so many small decisions would come together to the detriment of Germany that this would lead to an economic catastrophe, says Kegel. Nobody will pack their bags and run away, also for reasons of tradition. However, the crucial question is: “Where do I build my next factory and my next development center?”

In a ranking of the greatest naysayers, sootworm would take first place this Monday. This is also due to the fact that he represents the entire industry, including branches such as chemicals and steel, which consume a particularly large amount of energy. Russwurm’s outlook sounds bleak, he says he is realistic. “I don’t see an economic miracle, ie growth like in the 1950s and 1960s or a phase of long growth,” says the former Siemens manager. Chancellor Scholz had predicted this economic miracle for Germany a few weeks ago. “That’s more wishful thinking than reality,” says Russwurm.

The economic momentum in Germany is currently still extremely low. The industry association expects gross domestic product to grow “close to zero” in 2023. Such a mini-growth is far removed from the growth of the world economy, which the International Monetary Fund sees at 2.8 percent. The BDI expects exports to grow by just two percent. “That means we’re losing world market share again because world trade is growing faster than our exports.” In the processing industry, the BDI expects production to grow by around one percent this year. However, the situation in the sectors is different.

The forecasts by VDMA and ZVEI show just how different. Mechanical engineering is sticking to its forecast and expects a real production minus of two percent for 2023. The digital industry is raising its forecast from zero to one to two percent growth.

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