Investing Overseas

Germany increasingly attractive to foreign companies

lindt chocolate factory, foreign companies in germany
Yes, that looks good to me. Source: Bloomberg

Online retail giant Amazon is building a new logistics center in Mönchengladbach. Ryanair is investing €300 million ($354 million) more into its Frankfurt airport operations. Chocolatier Lindt & Sprüngli is adding another 950 jobs to its 2,300-strong production facility in Aachen.

These American, Irish and Swiss firms are just a few of the foreign companies drawn to Germany to expand their international businesses. A new study by EY, a consulting company, found that foreign companies invested in 1,124 projects in Germany last year, a 6 percent increase from 2016, which was already a record year.

Germany appeals because of its central location, good infrastructure and strong economy, says an Image survey of more than 700 managers. France and the United Kingdom followed close behind as top countries for investment. The UK was the only country in Europe with more foreign investment projects than Germany in 2016.

investment in germany 2017 EY study

From the investors’ point of view, Germany’s main attractions are its highly-qualified workforce (despite the above-average cost) and good transportation infrastructure (despite all the Autobahn construction).

But investors aren’t so hot on the state of Germany’s telecoms infrastructure — its positive rating declined by nearly 20 points in the past two years. The lack of broadband coverage remains a sticking point, and the country lags behind many of its neighbors in adopting fiber optics.

That could be part of why foreign companies promised to create 50,000 new jobs in the UK, compared to just 31,000 in Germany. Britain also benefits from a close relationship with the US and the common language that will remain a selling point even after Brexit. German companies have also continued to invest in Britain. After the Brexit vote, the pound lost 15 percent of its value, making UK products more competitive in the euro zone.

German firms are most likely to invest internationally in the UK and France, but central European countries are also benefactors of Germany’s strong economy. Semiconductor maker Infineon invested €1.6 billion in a new factory in Kärnten, Austria, to complement its plant in Dresden.

Ulf Sommer reports for Handelsblatt on companies and financial markets. To contact the author: sommer@handelsblatt.com

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