Germany is too expensive a location for many US companies

This paid off especially during the four-year tenure of US President Donald Trump. More than 2,000 US companies employ around 300,000 people in Germany.

It is noteworthy that for 41 percent of the companies, the rising energy prices are not only a reason for complaint, but also a driver for more investments as part of the energy transition and could lead to greater efficiency in Germany. On the other hand, only every fourth company representative believes that future investments will be held back due to the rising costs of electricity, gas and oil.

Opportunities for innovation through expensive energy

There are plenty of opportunities for promising investments, such as energy partnerships and trading in liquid gas. Company cooperations are conceivable, such as the Mainz-based company Biontech entered into with the US pharmaceutical giant Pfizer after the outbreak of the corona pandemic. AmCham Germany President Simone Menne can imagine something similar in industry, in order to cover the energy requirements in Germany with the help of American companies.

Closer ties to the benefit of both are urgently needed, because from the US perspective, Europe’s largest economy is becoming less and less attractive. Only 59 percent of the company representatives surveyed rated Germany as a good or very good location. In 2018 it was still nine out of ten US companies and in the previous year at least two thirds.

Criticism of Germany as a business location is developing into a hot topic. The focus is not only on the high labor costs that have been criticized for years, but even more on what Americans see as the poor quality of the digital infrastructure and the expensive energy. Two thirds of those surveyed see an urgent need for action here.

But what can this look like? From the point of view of Menne, who is also a member of the supervisory board of Deutsche Post and the branded goods manufacturer Henkel, it is not about state-subsidized electricity and gas supplies. “It is much more important to encourage companies to invest in energy production themselves: for example in a circular economy at the production site, which in turn could be financially supported by the state.”

The Marl-Hüls industrial park could be a possible model for such a circular economy. There are test procedures for separating carbon dioxide with the help of biomass and using it to produce synthetic fuels that are used by industry as energy carriers.

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Or the planned materials cycle between Wolfsburg and Salzgitter: The steel group of the same name agreed a declaration of intent with VW for the purchase of “green”, i.e. steel produced with the help of hydrogen. Salzgitter will melt the leftover steel at VW, process it and deliver it as new steel to the Wolfsburg car plant just a few kilometers away, so that VW can use it again in its cars.

Such cooperations can help to strengthen Germany as a business location. There is also room for improvement in transatlantic trade relations, where the majority of American companies want more liberalization. Menne pleads with the Handelsblatt to “consistently work through all trade barriers step by step”.

That means individual negotiations on the dismantling of all tariffs in the individual industrial sectors such as the steel industry. This is more effective than resuming negotiations on the failed transatlantic trade agreement TTIP and risking another failure.

The criticism of Germany as a location coincides with previous surveys by the auditing company KPMG. Accordingly, not only companies from the USA, but also from China, Japan and Europe assessed the largest economy on the old continent increasingly critically. Only 19 percent of the companies stated that they would invest at least ten million euros per year in Germany in the next five years. Four years earlier, 34 percent wanted this.

Joe Biden effect has fizzled out

As usual, the group board members surveyed named the inadequate digital infrastructure as the greatest obstacle to investment. For nine percent it was even the worst in the European Union (EU), for another 24 percent it was one of the five worst in the EU.

CFOs surveyed by KPMG rated the German tax system as “uncompetitive” and labor costs, averaging €36.60 per hour, well above the EU average of €28.50, as far too high.

In the land of unlimited opportunities, not only American but also German companies see potential for improvement. Not in terms of digitalization, what they see as excellent conditions for start-ups or the potential as a sales market – satisfaction here remains high. But there is a need for action in logistics: with the condition of many dilapidated American roads, bridges and rails.

From the point of view of German companies, the reliability of politics in the USA is declining again. It is rated as “poor” by almost half (48 percent) of those surveyed. In the previous year, after President Joe Biden took office, it was “only” 36 percent, the year before under Donald Trump it was 81 percent.

In their talks, Menne identifies a “gain in reality” among the German member companies. The Biden government is not making any progress with many initiatives because the Senate and Congress are blocking a number of projects and bills. This makes for less predictability than originally hoped.

Incidentally, such a “reality gain” is not only felt by German companies in the USA, but also by the majority of the population. The television network NBC recently presented a poll according to which 71 percent of Americans have little confidence in the Biden administration and its ability to react appropriately to Putin’s war. The most common criticism is: too hesitant.

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