FRANKFURT (dpa-AFX) - Concerns are growing about Germany's attractiveness as a business location. From the point of view of many mechanical engineers, Europe's largest economy has lost its attractiveness. At the same time, according to a study published Wednesday, foreign companies held back on investments here last year, while German companies invested billions in other countries. According to Ifo head Clemens Fuest, Germany is finding it harder than other countries to emerge from the trough following the Corona and energy price crises.

According to calculations by the employer-affiliated Institute of the German Economy (IW), around 125 billion euros more direct investment by German companies went abroad than vice versa. This is the highest outflow ever recorded in this country. The IW sees this as a bad sign for Germany as a business location.

In a survey conducted by the VDMA industry association, three out of four mechanical engineers said that Germany's attractiveness as a business location had declined in recent years. The companies attribute a similar development (75 percent) only to Great Britain. However, China has also lost its appeal, with more than one in two mechanical engineers (55 percent) holding this view.

The head of the Munich-based Ifo Institute, Clemens Fuest, told "Spiegel Online" that in the worst case scenario, "Germany could stagnate for years". According to "Spiegel," Stefan Kooths, head of economic research at the Kiel-based IfW Institute, also fears a sustained weakness in growth. The main reasons are the aging of society and the resulting shortage of labor.

Only 20 percent of the 667 VDMA survey participants rate the current business environment in Germany as good or very good. They gave a much better report card to the U.S., for example - 74 percent described conditions as good or very good.

"With the Inflation Reduction Act, the U.S. government has launched a program from which industry will benefit greatly in the coming years," explained VDMA President Karl Haeusgen. The program provides for billions of dollars in investments in climate protection, but ties many subsidies and tax credits to companies using U.S. products or producing in the U.S. themselves.

"In Germany, I miss this spirit of optimism," Haeusgen said. Too often, he said, the focus is on new regulations instead of relying on the innovative power of the market and small and medium-sized companies.

According to the survey, Europe is and remains the most important market for mechanical and plant engineering. However, more investments than before could go overseas. According to the survey, around one in five companies is looking to establish or expand production facilities in the USA, and one in six in India. According to the study, market size, market growth, proximity to customers and cost advantages play a decisive role.

According to IW calculations, foreign companies from OECD countries and other countries such as China and Brazil invested around 10.5 billion euros last year (2021: around 44.1 billion euros) in acquisitions or start-ups in Germany, among other things. This contrasted with 135.5 billion euros in direct investment (2021: around 157 billion euros) by German companies abroad.

"Investment conditions in Germany have recently deteriorated once again due to high energy prices and the increasing shortage of skilled workers," said IW economist Christian Rusche. He added that many of the problems were home-made, including high corporate taxes, rampant bureaucracy and an ailing infrastructure. "For Germany to once again become the top address for foreign investment in the future, the German government urgently needs to take countermeasures."

The IW sees several reasons for the development. The shortage of skilled workers is placing an enormous burden on companies. Investment packages such as the U.S. Inflation Reduction Act made investments outside Germany more attractive. In addition, the German export model is no longer working as well as it used to in the face of growing protectionism.

Following the shutdown of an ammonia plant at BASF, Michael Vassiliadis, head of the IG BCE trade union, fears the end and the migration of further production parts in the German chemical industry. "The risk of de-industrialization is not a pipe dream, but a real danger," Vassiliadis told Wirtschaftswoche. "If we lose the energy-intensive companies, the vision of a new green business model in Germany that other countries imitate will quickly become a farce."

The president of the Federation of German Industries (BDI), Siegfried Russwurm, recently warned that more and more German companies, including far into the SME sector, were looking at moving parts of their value creation out of Germany./mar/DP/stw