Since 2018, German industry has significantly reduced its production levels. According to a study by the consulting firm Strategy&, the chemical industry saw a decline of 21%, the paper industry 19%, basic metals production 18%, glass manufacturing 16%, and the automotive industry 16%. This negative trend extends across many other sectors. As per analysts at Strategy&, deindustrialization is already well underway.

Germany no longer benefits from global industrial growth to offset domestic weaknesses or high wages. And the future doesn't look much better domestically. When it comes to investment decisions, Strategy& cautions that they usually do not favor Europe – let alone the specific location Germany. Foreign investment in Germany, particularly in the chemical industry, has plummeted by 90% since 2018. Investment in future technologies and manufacturing processes are now being made in other countries, making them more competitive, growth-oriented, modern, and financially robust – also in terms of tax revenues and thus the financial strength of the state.

This development is particularly concerning because, in the past, Germany relied heavily on booming exports to meet growing global demand. The years 2022 and 2023 marked a turning point, especially for the chemical industry, as more products were shipped from China to Germany than the other way around. „The export cash cow can no longer compensate for the weakness of the domestic market", the consultants write. Besides high energy prices, uncertain energy market conditions relating to the climate transition, and a heavy regulatory burden, are cited as reasons.

The latter is also considered by the Ifo Institute as one of the major obstacles when it comes to Germany's attractiveness as a business location. In the quarterly Economic Experts Survey (EES), economists worldwide were asked about current European and German economic policies. The latest survey focused on location-related issues, such as how the country fares in terms of attracting companies through direct investment and portfolio investment. The Ifo researchers refer to "a very sobering picture“ in this context. According to the vast majority of respondents, the German business location has „substantially lost attractiveness“ over the past ten years. The evaluations are more negative for Germany than for most other European countries. Furthermore, nearly half of the German experts themselves expect further deterioration over the next ten years.

The reasons cited are primarily regulation, and bureaucratic obstacles. They are compounded by the lack of digitization, and a skilled labor shortages. The tax burden, often cited at the top of location debates, ranks lower in this survey.

These negative factors largely align with similar studies, such as the country index from the Family Businesses Foundation. The international location ranking by the IMD Business School in Lausanne also points to some of the same problems. According to the Ifo data, the most crucial areas for policymakers to improve the business location is „reducing bureaucracy, followed by investing in infrastructure, and facilitating labor migration.“