Germany flag Germany: Investing in Germany

Foreign direct investment (FDI) in Germany

FDI in Figures

Germany is considered an attractive country for foreign direct investment, but in recent years the influx of FDI has been hampered by the global recession and subsequent Eurozone crisis. According to the 2023 World Investment Report by UNCTAD, FDI inflows into Germany were down by 76.2% in 2022, totalling USD 11 billion, against USD 46.4 billion one year earlier. In the same year, the stock of FDI decreased slightly to over USD 1 trillion (-4.8%). The country has traditionally been a key investor: Germany's outward investment stood at USD 143 billion in 2022. According to data from the national Trade and Investment Agency (GTAI), Germany’s federal states registered 1,783 FDI projects in 2022 (excluding M&A). The number of business expansion projects remained stable at 1,783, with the United States leading as the primary source country, contributing 10% more projects (279 in total). Switzerland, the second-ranking country, saw a slight decrease in FDI, while Britain experienced a 21% rise, securing the third position with 170 projects. In the same year, key sectors attracting FDI to Germany included semiconductors, clean energy, digitalization, logistics, and the service sector. However, in 2023 GTAI expects a decline in foreign direct investments by 18% compared to the previous year. In 2023, 16 investments exceeding EUR 100 million have been confirmed, including six in the billion-euro range. Significant commitments include Eli Lilly's EUR 2.3 billion investment in a new plant in Alzey, and BP's substantial EUR 6.8 billion for two North Sea wind farms. Additionally, three data centers in Berlin, Wustermark (Brandenburg), and Hanau (Hesse) are each anticipated to surpass the billion-euro mark. Finally, apple is set to make a substantial investment of around EUR 1 billion to expand its European center for chip design in Munich. Overall, FDIs in Germany are mostly owned by Luxembourg, the Netherlands, the U.S., Switzerland and the UK, which represent more than 60% of the total stock. France, Ireland, Italy, Austria, and Japan are also investing in the country. FDIs are mainly oriented towards finance and insurance, manufacturing and trade, information and communication, management and consultancy activities, and real estate. The latest data from OECD shows that in the fist half of 2023 FDI inflows to Germany reached a total of USD 15.6 billion, more than four times higher compared to the same period of the previous year.

Among the country’s strengths are a highly powerful and diversified industrial network, a highly skilled workforce with a good command of English, reliable infrastructure, a favourable social climate, a stable legal framework and a location at the heart of Europe. Its main weaknesses are a high tax rate (for both individuals and businesses), rather inflexible labour laws, and a high dependence on the automotive and mechanical industries. The Economist Business Environment ranking puts Germany in the 13th place out of 82 countries in terms of business environment. However, The Economist notes that the country is more exposed than most other large high-income economies to the near-term fallout and energy risks from the Russia-Ukraine conflict. Constraints on the ranking include a high tax burden on labour income and on firms, combined with high administrative costs. Germany ranks 8th among the 132 economies on the Global Innovation Index 2023 and 18th out of 184 countries on the 2023 Index of Economic Freedom.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) 56,20446,46811,053
FDI Stock (million USD) 1,153,0991,057,9901,007,533
Number of Greenfield Investments* 1,1051,395984
Value of Greenfield Investments (million USD) 26,50447,23134,398

Source: UNCTAD, Latest available data

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 
Country Comparison For the Protection of Investors Germany OECD United States
Index of Transaction Transparency* 5.0 6.5 7.0
Index of Manager’s Responsibility** 5.0 5.3 9.0
Index of Shareholders’ Power*** 5.0 7.3 9.0

Source: Doing Business, Latest available data

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

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What to consider if you invest in Germany

Strong Points

Germany's strengths for FDI are:

  • Strategic location in the centre of Europe
  • Political stability and a good anchor in international relations
  • The largest population of the European Union
  • Infrastructure among the most developed in the European Union
  • Strong manufacturing base (almost a third of the GDP)
  • Strong exports (high range products and diversified clients)
  • Advanced technology and expertise
  • Highly qualified work force
  • Consolidated public finances
  • Competitive taxation.
Weak Points

Germany's weaknesses for FDI are:

  • Eastern part of the Germany (former DDR) is struggling to catch up with the western part in many areas
  • Ageing population weighs heavily on growth
  • German economy is highly dependant on exports, especially to China
  • Ageing infrastructure
  • Unproductive service sector
  • Insufficient infrastructure for development of start-ups
  • A low investment/GDP ratio
  • Lack of engineers
Government Measures to Motivate or Restrict FDI
Germany distinguishes itself with a business climate compliant with international standards and with transparency of its judicial system. The German Government is implementing measures aimed at encouraging investments including:

  • Grants for investments (Cash Incentives Program: GRW)
  • Grants for R&D for different research categories (fundamental research, industrial research, experimental development)
  • Grants for hiring personnel (programs focusing on recruitment support, training support, wage subsidies and on-the-job training)
  • Public loans
  • Public guarantees

For more information, visit the website of Germany Trade & Invest (GTAI).

Bilateral investment conventions signed by Germany
Germany has signed bilateral investment treaties (BITs) with numerous countries. To see a list of participating countries, consult UNCTAD website.

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Latest Update: June 2024

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