The relocation of business functions abroad is a key issue for Germany as a business location and raises questions about the country’s long-term viability as a business hub. While some companies are tapping into new markets through globalization, others are forced by high costs and bureaucratic hurdles to relocate or even close down entirely. These developments have an impact not only on the companies affected, but also on Germany’s labor market and economic stability.

Overview of Relocations (2021–2023)

Between 2021 and 2023, 1,300 companies with at least 50 employees relocated parts of their business operations or their entire operations abroad, corresponding to a relocation rate of 2.2%. According to the magazine WirtschaftsWoche and an analysis by the Federal Statistical Office, approximately 1,300 companies relocated partially or completely abroad during this period.

EU Flags

Target regions for relocation and the reasons behind it

Most of these companies (900) chose destinations within the European Union, while 700 companies relocated to countries outside the EU. India was a particularly common destination, with 271 companies relocating their operations there, followed by the United States and Canada (128 companies), China (126 companies), and other Asian countries and Oceania (115 companies).

Of the outsourced functions, 1,015 involved support functions such as administration, logistics, or IT, while 615 companies outsourced their core business functions (e.g., production or research and development) abroad.

The companies cited the following as the main reasons for the relocation: a reduction in labor costs (74%), strategic decisions by corporate management (62%), other cost advantages (59%), and a shortage of qualified workers in the domestic market (38%).

Economic Policy Conditions as Drivers

Companies cite high energy costs, poor political conditions, and excessive bureaucracy as the main reasons for their exodus, according to a report in *WirtschaftsWoche*. A 2024 survey showed that 60% of companies view high energy and raw material prices as the main risk, while 57% cite poor economic policy conditions as a problem.

Warnings from the BDI and the DIHK

As early as 2023, the Federation of German Industries (BDI) warned of a creeping exodus. Thirty percent of small and medium-sized enterprises planned to relocate parts of their production abroad, 16 percent were already actively doing so, and 15 percent had already scaled back or halted production in Germany. BDI President Siegfried Russwurm emphasized that without improvements to the business environment, Germany’s competitiveness as a business location would continue to suffer, and he called for reduced bureaucracy, targeted tax cuts, and a competitive industrial electricity price. The German Chamber of Industry and Commerce (DIHK) confirmed this trend and warned of a creeping exodus of German companies.

Miele is cutting 1,300 jobs in Gütersloh and relocating 700 positions to Poland. Porsche is planning a new production facility, possibly in North America, due to subsidies of nearly 2 billion euros. Kärcher is relocating jobs from Reutlingen to Latvia. Other companies, such as Continental and Bosch, are considering relocations.

Conclusion

The exodus of German companies is a complex phenomenon driven by high costs, bureaucratic hurdles, and a lack of competitiveness. Without targeted measures to improve the business environment, this trend could jeopardize Germany’s economic stability in the long term.