Amazon fulfillment center
The online retailer built new logistics centers or expanded existing ones in Oelde, Kaiserslautern, Gera and Gersthofen, creating 4,300 new jobs.
(Photo: dpa)
Düsseldorf Closed borders, interrupted supply chains, standstill in the economy, slump in profits: in 2020, the conditions for companies to invest in new production facilities and service centers abroad were extremely poor.
Measured against this, Europe’s largest economy held up well: The investment projects announced by foreign companies in Germany shrank by “only” four percent to 930 compared to the previous year. This shows an analysis by the auditing and consulting company EY. Only projects that lead to new locations and jobs were recorded – mere takeovers were left out.
Many other countries such as Great Britain and France were hit much harder – with declines of more than ten percent each.
Foreign investors announced 5578 investment projects across Europe. That was 13 percent less than the year before – a negative record. Even in the crisis year 2009, when the economy collapsed as much as in 2020, investments fell by “only” eleven percent.
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German companies, on the other hand, cut their spending: They invested a total of 603 projects in other European countries. That was eleven percent less than in the previous year. Nevertheless, German companies are once again in second place in the investor ranking behind US companies and well ahead of British companies.
The main investment target of German companies in other European countries was France with 159 projects last year. Great Britain (64) and Spain (60) follow some distance behind.
Amazon creates new jobs
Once again, Amazon was one of the major investors in Germany. The American online retailer set up new logistics centers in Oelde, Kaiserslautern, Gera and Gersthofen, among others, or expanded existing ones, creating 4,300 new jobs.
The largest single investor in 2020 came from the automotive industry: the Peugeot manufacturer PSA with its German subsidiary Opel and the oil company Total invested more than five billion euros in building a battery production facility in Kaiserslautern. This creates 2000 new jobs. France and Germany are funding the project with a total of 1.3 billion euros.
EY Germany boss Henrik Ahlers sees the overall manageable decline in the number of foreign investments in Germany as a sign of great confidence in competitiveness. The corona crisis led to a kind of paralysis in spring – including massive austerity measures and a temporary halt to many investment projects. “But in the second half of the year the economy got going again in many places and the investment environment improved considerably.”
There are several reasons why Germany recorded fewer losses than the other two important investment locations, France and Great Britain. Economic output in Germany fell by “only” 4.8 percent and thus less sharply than in France (–8.1 percent) and Great Britain (–9.9 percent).
The main reasons for this are Germany’s export strength and the strong manufacturing industry. Many countries, especially China and the USA, opened up faster than Europe after the first lockdown last spring. The location Germany benefited from this. Exports picked up again quickly – and investors came back with them.
In addition, Germany benefits from its location in the middle of Europe and the comparatively good transport infrastructure: The number of logistics projects in 2020 more than doubled from 63 to 129 in the previous year. As a result, Germany is increasingly becoming a hub for Western and Eastern Europe.
After all, a well-trained workforce and political, social and legal security abroad are highly valued. This view is underpinned by a survey conducted by the American Chamber of Commerce in Germany (AmCham) among its member companies in the spring.
Accordingly, a good 90 percent of those surveyed rate the potential as a job market and the quality of research and development in Germany as good or very good. The quality of the skilled workers and trained employees, which includes the dual training system, was even rated as good by all those questioned without exception.
Mechanical engineering and the automotive industry are cutting down investments
In view of the sharp drop in profits in the manufacturing sector, companies from the mechanical engineering and automotive industries in particular reduced their investments across Europe by 21 and 35 percent respectively in 2020. Pharmaceutical companies, on the other hand, significantly expanded their capacities: investments across Europe rose by 62 percent. According to EY forecasts, this boom is likely to continue this year.
The dichotomy in the promising IT and software industry is remarkable: across Europe, the number of investment projects fell by 14 percent to 1,046, while in Germany there was an increase of 13 percent to 164 projects.
One of the outstanding projects comes from Alphabet and its subsidiary Google. In order to expand its location in Munich, the American IT group has bought the site of the Postpalast on Hackerbrücke. In addition to the already 1000 employees, another 1500 employees are to be added to work on the company’s own browser and on data protection details.
EY Germany boss Ahlers expects IT-related investments to become even more important in the medium term: “The pandemic has mercilessly exposed existing weaknesses in the area of digitization.”
Anyone who relied on analog communication and business models in the 2020 crisis – whether in companies or in public administration – often encountered considerable problems in lockdown times. This is likely to be reflected in greater IT investments in the future.
More: German corporations are recovering faster than expected