Hopes for an economic policy breakthrough
The German chemical industry, struggling with the economic downturn, is pinning its hopes on a government change following the early federal elections in February. For the German Chemicals Industry Association (VCI), there is a need to improve competitive factors in Germany, through reducing bureaucracy, lowering taxes, and securing affordable energy.
„The conditions for a political breakthrough are good“, VCI President Markus Steilemann said in Frankfurt recently. He emphasised the hope that the country will get a stable government able to initiate reforms, and that the economy will pick up again. Germany cannot afford a „collective burnout“, and while companies are willing to do more to meet the challenges, the industry is also hoping for better conditions.
Bureaucracy as a major hindrance
The VCI sees excessive bureaucracy and „agonisingly long“ approval processes as the biggest disadvantages for Germany as a business location. Energy prices continue to be a concern, though according to Steilemann, electricity prices have returned to early 2021 levels. While the price isn't ideal, it is no longer the main negative factor regarding location issues. Security of supply, and the balance between green transformation and economic success are central. He is hoping for a „practical approach to achieving the most cost-efficient grid expansion“ from the government.
The VCI hopes the new government will implement corporate tax reform, significantly lowering the tax burden. Steilemann advocates for the abolition of the solidarity surcharge ,and tax incentives for investment. The state must prioritise expenditure, avoiding cuts in infrastructure, security, and education. In addition to the debt brake, binding fiscal rules and a national balance sheet are necessary, to ensure greater transparency in government spending.
Low profits in the domestic market
In view of increasing protectionism, and the tariffs planned by the next US President Donald Trump, the VCI does not yet see any clear consequences for the chemical industry. The globally represented industry could also benefit if regional markets are strengthened.
Although the German chemical industry is „intact“ and its products remain „value-creating and in demand“, Steilemann acknowledged that profits are currently made abroad, rather than in Germany and Europe.
VCI member companies are reducing their domestic investment budgets, and are instead setting up new plants abroad. The focus is on the US, partly also Mexico, as well as China and Southeast Asia. „Investments are made where demand and growth are seen“, says Steilemann.
According to a VCI survey, the mood in the industry is mixed: About a quarter of companies expect a rise in earnings in 2025, another 26% expect stable earnings, and 46% foresee a decline.
