Germany recorded its highest stage of overseas direct funding final 12 months, with a surge in UK firms establishing operations to maintain a post-Brexit presence within the EU.
FDI into Germany totalled €25.3bn final 12 months, up 261 per cent from €7bn in Covid-hit 2021, in response to official figures from Germany Commerce & Make investments (GTAI). The largest sources of funding have been the US, which accounted for 279 initiatives, Switzerland and the UK. The entire of 170 FDI initiatives originating within the UK was up 21 per cent on 2021.
“For British firms, it’s notably vital to have a foothold within the EU after Brexit,” stated Robert Hermann, chief government of GTAI.
One of many greatest UK investments was by Frasers Group, the proprietor of Sports activities Direct, which introduced final April that it was spending €300mn on a brand new distribution centre at Bitburg airport in western Germany that might turn into its European headquarters.
UK firm Mura Expertise introduced it could construct a chemical recycling plant within the jap city of Böhlen that might flip 120,000 tonnes a 12 months of plastic waste into oil. Proton Motor Energy Programs stated it was increasing its Puchheim plant in southern Germany, which produces gas cell stacks and hydrogen gas cell engines.
THEMPC, a promotional and branding firm, arrange an operations hub in Munich to supply and distribute printed items and bespoke packaging contained in the EU with out clients needing to pay additional duties and taxes.
In euro phrases these have been dwarfed by the most important overseas funding in Germany introduced in 2022: US chipmaker Intel’s plan to construct a €17bn factory within the jap German metropolis of Magdeburg. Sweden’s Northvolt additionally introduced a €4.5bn investment in a brand new battery manufacturing facility within the northern state of Schleswig-Holstein.
The GTAI figures measure the worth of introduced FDI initiatives into Germany in 2022 with the cash more likely to stream solely in subsequent years.
In keeping with OECD figures which measure inflows, Germany attracted $11bn of FDI in 2022, lower than the UK and 1 / 4 of the dimensions of France and Sweden. OECD figures additionally present that German firms invested $142bn overseas in the identical 12 months.
Flows of FDI embody greenfield investments in new factories, buildings and equipment and in addition cross border takeovers and mergers. With a big commerce surplus, Germany typically offers a lot bigger outflows of FDI than it receives in inflows.
The massive improve in vitality costs final 12 months attributable to Russia’s conflict in Ukraine made Germany a a lot much less enticing place to do enterprise than it was earlier than the invasion.
Whereas fuel costs at the moment are near prewar ranges, many firms are nonetheless wanting elsewhere, notably the US the place President Joe Biden’s Inflation Discount Act has supplied $369bn of subsidies and tax credit for clear vitality applied sciences.
“In relation to new choices, the numbers are dropping,” stated Hermann, figuring out the IRA as a possible issue. “We assume it should impact funding in Europe and Germany,” he stated.
The company famous that inbound funding from China was in retreat, with solely about 141 initiatives introduced final 12 months — the bottom determine in eight years.
Some consultants have attributed the lower to tightened restrictions on M&A exercise by Chinese language firms in Germany. However Hermann blamed the decline on the aftermath of the Covid-19 pandemic, which had made it more durable for Chinese language executives to journey to Germany.