Future Atlas 2016 - CITY RANKING

The Rhineland Paradox

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Bayer is Leverkusen and Leverkusen is Bayer.
  • Why it matters

    Why it matters

    If Leverkusen ever hopes to rebound, it will need to find solutions for its high unemployment, hefty welfare payments and soaring budget deficits.

  • Facts

    Facts

    • Leverkusen’s ranking has plummeted in the current German Future Atlas, a regional ranking published every three years by the Prognos research institute in collaboration with Handelsblatt.
    • The city is home to German pharmaceutical giant Bayer.
    • It is also home to one of Europe’s largest chemical parks.
  • Audio

    Audio

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The chemical park in Leverkusen near Cologne is a maze of plants, research labs and pipes forming bridges between the numerous buildings crowding the site. It’s one of Europe’s largest chemical parks – thanks to Bayer.

Towering above the chemical park is the Bayer cross, once illuminated by 1,710 light bulbs but now lit up by modern light-emitting diodes. The landmark cross is to Leverkusen what the Brandenburg Gate is to Berlin.

The entire 480-hectare (1,186-acre) production area was once occupied by Bayer alone, but other chemical firms have since settled there.

The company’ world-famous aspirin began its triumphant march around the globe in Leverkusen, where a steady flow of innovation products have flowed ever since.

Its new chief executive, Werner Baumann, now aims to add the biggest new chapter to Bayer’s history of expansion by acquiring U.S.-based Monsanto for €55 billion ($61.6 billion), which would make Bayer the world’s largest agricultural chemistry producer.

“We are located in a booming region and are forced to be able to bear our social burdens on our own.”

Frank Stein, City treasurer, Leverkusen

Leverkusen has always been Bayer, and Bayer has always been Leverkusen. But while Bayer’s success story continues – the company has repeatedly made it to the top of the DAX index of Germany’s 30 largest companies – the city is grappling with major problems. In fact, it’s nearly broke.

Leverkusen is ranked near the bottom of Prognos research institute’s 2016 German Future Atlas, a regional ranking published every three years together with Handelsblatt. The city dropped from its 89th ranking to 196 among the 402 cities and regions analyzed.

 

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Although Leverkusen attracts skilled workers with a plethora of research jobs, less qualified workers barely have a chance, which explains why the city struggles with an unemployment rate of 8.4 percent. Ten percent of households receive welfare.

Indeed, Leverkusen is a paradox – home to innovative and productive industries on the one hand and many people out of work on the other. It expects a deficit of more €36 million this year. Other cities that headquarter large corporations like Wolfsburg, which is home to Volkswagen, are far better off financially.

But that doesn’t appear to bother Frank Stein, Leverkusen’s chief financial officer. “We’re located in a booming region,” he said, claiming there is also enough money in the budget to cover the city’s comparatively high welfare costs.

Based on its manufacturing and services output, Leverkusen ranks near the top of cities in North Rhine-Westphalia, with a per capita gross national product of €82,000, behind Bonn and Düsseldorf. But its commercial tax revenues are noticeably low, just around €400 per inhabitant in 2014.

By comparison, the commercial tax figure in Wolfsburg with a economic mono-culture similar to Leverkusen’s was €2,225 in the same year.

The disparity is a well-kept secret. “I can only say (the amount of commercial tax) is the consequence of location decisions by the company as well as the use of legal instruments to optimize taxes,” said Mr. Stein, a trained lawyer.

While Bayer routinely deflects questions about the tax, some local companies offer a hint: Monheim. The neighboring city is home to company’s agrochemical division, Bayer CropScience, and patent department there. It also has zero debts and the lowest commercial-tax rate in the state, which has helped the city attract other business. Alone last year, it generated €225 million in commercial taxes.

But Leverkusen’s comparatively low commercial tax revenue is just one issue; it’s high unemployment rate another. The search for clues in Leverkusen inevitably leads to where everything began – to Bayer’s former factory premises, now called Chempark. For people with skills, opportunities abound there but less so for those without.

The area is managed and operated by Currenta, a joint venture between Bayer and Lanxess, a Bayer spinoff specialized in chemicals. The company provides energy, environmental and security services, among others.

About 50 producers and service providers are located in Chempark, which was formed after Bayer withdrew from some business fields in the 1980s. “More than 29,000 people are employed here,” said Ernst Grigat, who heads the industrial park.  “We are one of the largest training centers in the region.”

Currenta trains young people on site for Bayer, Covestro, Lanxess and a number of other companies. In addition, both the College of Higher Education for Economy and Management and the faculty of applied natural sciences of the Cologne University of Applied Science are located there.

That’s the positive employment and training pitch Leverkusen likes to make when promoting itself. Renate Helff has to deal with the reality for the city’s long-term unemployed. About 70 percent of them have not completed any training or have any marketable skills. Many of them moved to Leverkusen and its outlying suburbs in search of jobs, where apartments are more affordable.

“Finding a job for them,” Ms. Helff said, “will  always be difficult if they don’t have professional qualifications.”

But is simply teaching unemployed workers new skills the key to Leverkusen’s unemployment problems?

Many of these people, Ms. Helff argues, will never be able to meet extreme demands of the Leverkusen job market. And the area lacks large logistics companies that often hire less qualified labor.

Leverkusen politicians and city managers realize they must escape from the downward spiral of persistently high unemployment and low tax revenues. But to do that, they also know they must break through the city’s dependence on the chemical industry, which shouldn’t be a problem. The city has excellent highway, railway and river transportation connections and is near both the Cologne/Bonn and Düsseldorf airports.

A start in this direction is the the Leverkusen Innovationspark, on the grounds of the former Wuppermann steelworks.

“Our world has changed; we must offer young people prospects in a variety of areas,” said Frank Obermaier, managing director of Leverkusen’s economic development department.

The Innovationspark has been attracting engineers and programers as well as those wishing to work in the health care industry. Around 50 firms are now located there.

“Leverkusen is so attractive as a business location that we came back here from Berlin,” said Markus Hensel, head of IT at Tropper Data Service.

Jürgen Kaack, from Breitband NRW, said Leverkusen’s high-speed internet is among the best in the country – another plus for the city, which needs as many as it can get.

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Simone Wermeslkirchen is an editor with Handelsblatt. To contact the author: wermeslkirchen@handelsblatt.com

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