For the economic success of a company the choice of a suitable company location is essential. Not least because of the long-term impact. The business location Germany enjoys a very good reputation with domestic companies as well as with foreign investors. The term business location Germany describes the general and cross-border framework conditions and location factors of Germany.
Compare the German federal states here using selected location factors: Business location comparison Germany
Central Location Advantages
The economic success of Germany is based on a variety of factors that mutually positively and sometimes negatively influence each other. The high location quality of Germany is characterized in particular by the following location factors:
- Location and infrastructure: Due to its central location in Europe, Germany is an important location between East and West. Germany has a well-developed road and rail network as well as a secure energy supply and communication infrastructure.
- Quality: The training system in Germany has been ensuring that the labor market has been well-trained for decades. In addition, the wide-ranging university landscape ensures a large supply of highly qualified workers. The predicate "Made in Germany" rests not least on the high qualification of the workforce.
- Research and development: As an inventor country, research and development play an important role, which is why it is particularly supported by the state. With the above-average number of patent applications, Germany ranks third worldwide.
- General conditions: At the business location Germany companies find excellent conditions. In addition to political stability and legal certainty, Germany is also characterized by its high quality of life.
At the same time, Germany's success indicators derive some challenges for the business location. Due to the practical full employment, Germany lacks specialists. Labor costs are comparatively high due to the high quality of life and the high qualification of the workforce. The complicated tax system and the bureaucracy are counteracted by tax relief and advisory services.
Economic Environment
Germany is the largest exporter worldwide after the USA. German export business is based on the innovative small and medium-sized enterprises (SMEs), which make up 99.6 percent of all companies. Many of the SMEs operate in market niches and are world market leaders in their field as so-called "hidden champions". Together with leading international companies such as Volkswagen, Siemens, Bayer, BASF and Bosch they form the foundation of Germany's economy.
Germany maintains close relations with the countries of the European Union. The duty-free regime within the EU and the euro as the single currency of 19 states are very good conditions for bilateral trade:
- About 60% of German exports go to the EU
- About 50% of German investment goes to the EU
- About 75% of foreign investment comes from the EU
Innovation Location
Germany is Europe's biggest investor in innovation. Since 2005, the expenditure on research and development (R&D) steadily increased at a compound annual growth rate of around four percent. In 2015, German companies spent EUR 90 billion on R&D. Internationally, only the US, Japan and China offer large R&D budgets. A study by the German Institute for Economic Research (DIW) comes to the conclusion that no other industrialized country generates a greater share of gross value added in research-intensive manufacturing industries. The share of total added value in research-intensive sectors in Germany exceeds that of Japan and the USA.
Germany is a global innovation beacon, according to the Global Competi-tiveness Report 2018 of the World Economic Forum. A strong entrepreneurial culture, interaction and diversity help to distinguish Germany as a "super innovator" from other innovation centers such as Japan and Korea. The German patent numbers prove the innovative work of German companies. With more than 18,800 patents submitted to the European Patent Office in 2017, the German patent share is almost twice as large as that of France and the UK combined. Germany combines two important location factors with its first-class research and development environment and its strong export orientation.
Investment Location
Germany is very well embedded in the global economy. According to current studies, Germany is one of the most popular investment locations in Europe. This is also shown by the numbers:
- Approximately 80,000 foreign companies are based in Germany (3.7 million jobs)
- Approximately € 466 billion investment volume in 2015
About 10 percent of the manufacturing industry in the EU is provided by German companies. Due to the high productivity and the excellent general conditions, more and more foreign companies open production facilities in Germany.
In 2018, 2062 foreign companies settled in Germany (Source: Germany Trade & Invest (GTAI):
- Investment projects from the USA: 345
- Investment projects from Switzerland: 229
- Investment projects from China: 188
- Investment projects from the UK: 168 (The number of UK start-ups has risen 34 percent since the Brexit vote)
According to a study carried out by business consulting company Ernst & Young, investment in German start-ups rose by 36 percent year-on-year, reaching 6.2 billion euros in 2019. Berlin remains Germany’s start-up capital, taking in 3.7 billion euros or 60 percent of the capital raised. Second in importance was Bavaria with its capital Munich. The figures are all the more impressive for bucking the global trend, which saw venture capital declining in 2019 by 17 percent to 224 billion dollars.
International Exhibition Location
Germany is the world's most important trade fair location. Every year 160 to 180 international and national trade fairs take place in Germany with around 180,000 exhibitors and 10 million visitors. Numerous leading trade fairs, such as the Hannover Messe, CeBIT or IAA are located in Germany. The outstanding position of German trade fairs is particularly evident in the high proportion of foreign exhibitors of over 50%.
Every year, exhibitors and visitors spend € 14.5 billion on their trade fair engagement in Germany. This is shown by calculations by the Association of the German Trade Fair Industry Auma. The macroeconomic production effects reach 28 billion euros. The German trade fair organizers generate annual sales of almost 4 billion euros. Of the ten top-selling exhibition companies in the world, five are based in Germany.
Overview of German Business Locations
The business location Germany is not a homogenous entity. Rather, federal states and regions differ in their economic structure. They have different focus sectors and different location factors. When searching for a business location or production site in Germany, the definition of the most important location factors for the planned project is essential and forms the basis for a well-founded location decision.
With our location analysis you can analyze business locations in Germany and find the right location for your project.