Investment in Germany by foreign firms drops to decade low

Investment in Germany by foreign firms was at its lowest level in a decade last year, an IW institute study showed on Thursday, as de-industrialisation fears loomed over Europe's largest economy.

Foreign companies invested only about 22 billion euros ($24.07 billion) in Germany in 2023, according to the study.

Overall net outflows - the difference between investments by German firms abroad and foreign ones in Germany - slowed last year, the institute said, to 94 billion euros. However, the two preceding years, 2022 and 2023, recorded higher outflows.

High labour and other costs have driven many German companies to relocate parts or all of their business to cheaper locations, such as emerging European economies.

Around 90 billion euros, or around two-thirds of all foreign investment by German companies, recently flowed into EU member states, primarily the Benelux countries and France.

In contrast, foreign firm hardly invested in Germany apart from "in smaller acquisitions or projects - an indication of the unfavourable location" in terms of global competition, IW said.