The federal government says before its investor conference that Germany is in demand. How does this fit into the general doom narrative? Eight graphics provide the surprising answer.
Foreign direct investment in Germany was recently at 54 billion euros annually and has remained largely constant over the past three years, with British investors recently replacing US companies.
Gross fixed capital formation in Germany amounted to 21.5 percent of gross domestic product and has fallen slightly since 2022, while Italy and the USA achieve higher values and Germany has an investment deficit of billions compared to both countries.
State investments are growing significantly faster than private ones, which are only increasing minimally; The federal government is calling for greater mobilization of private capital for greater competitiveness.
Equipment investment in industry has fallen by around 2.5 percent over the past five years, while investment in research, development, software and licenses is increasing, indicating a focus on artificial intelligence.
Berlin. On Tuesday the capital will be infested by “locusts”. In 2005, the then SPD chairman Franz Müntefering triggered what today would be called a shitstorm by comparing some financial investors with the swarms that were eating entire areas of land.
The reception for the 200 investors who will take part in the federal government's first investor conference in Berlin will be noticeably warmer. Chancellor Friedrich Merz (CDU), once chairman of the supervisory board at Blackrock Germany, invited them himself.
For Merz, it should also be about countering the narrative of decline about the German location. His black-red government came into power with great promises of reform.
But after around a year and a half, the results are mixed. “The federal government must finally step up its game to make Germany more competitive and create a new climate for companies here to invest,” said Daniel Hager, President of the Association of the Electrical and Digital Industry (ZVEI), to the Handelsblatt ahead of the conference.
So will the investor conference just be a big show that in reality achieves nothing given the state of Germany as a location?
Anyone who wants an answer to this should not be guided by political whitewashing or public catastrophism, but rather by numbers. The eight graphics below show precisely what the situation is really like as an investment location in Germany.
1. Direct investment: constant inflow of billions
In the federal government they are looking forward to the conference guests from all over the world. Foreign investors have a much more positive view of Germany than domestic investors. “We compare ourselves with the situation 25 years ago, when the world was different and the investors compared us to other locations,” say government circles.
Direct investments from abroad prove that sentences like these are not just PR. Last year, foreign investors channeled 54 billion euros into Germany, according to data from the Bundesbank on investments in companies or start-ups. Internal company payment transactions were left out in order to only reflect genuine new investments.
While US companies have recently withdrawn from Germany, British investors in particular have filled the gap, says Samina Sultan from the German Economic Institute (IW).
Direct investments have been largely constant for three years and are in some cases significantly higher than the inflows from the pre-Corona period. In the past decade, around 1,600 companies have relocated to Germany or expanded their plants every year.
There are several reasons for this stable development. “Foreign investors can invest specifically in the advantages of Germany as a location and better avoid the location’s disadvantages,” says Geraldine Dany-Knedlik, head of economic development at the German Institute for Economic Research (DIW). There is also great interest from abroad in participating in the German arms boom.
In addition to the defense industry, there are other fields with great potential for investors in Germany, including industrial AI, future technologies, energy systems and infrastructure. On Monday, the economic initiative “Made for Germany” presented a study to Economics Minister Katherina Reiche (CDU): It estimates the investment potential in the above-mentioned areas in Germany at around 2.9 to 4.1 trillion euros by 2035.
However, this shows what a gap will open up at this point if direct investments simply remain constant. “In view of the investment requirements, that is not enough,” says Dany-Knedlik. “And Germany is obviously not making up for the deficit from the weak years.”
2. Gross fixed capital formation: behind the euro and the USA
Gross fixed capital formation offers a more comprehensive view of investment activity in Germany. They show the total value of the capital goods purchased by producers, whether machines, vehicles, buildings or research and development.
Most recently, fixed investment in relation to gross domestic product (GDP) in Germany was 21.5 percent. This means that they have fallen slightly since 2022, but the level is slightly above the pre-Corona period.
A comparison with other countries makes the German figures seem weaker. In Italy, fixed investment is at 23.3 percent, a significant increase over the past decade when it was 17.7 percent, data from the International Monetary Fund (IMF) show. Investments in the USA rose slightly during the period to 21.4 percent.
A current Allianz study puts Germany's investment deficit due to a lack of investment compared to developments in the euro zone at a total of 390 billion euros and compared to the USA at 730 billion euros.
3. Private investments: Big split with the state
When it comes to fixed investments, this is currently being driven particularly by the state because it invests a lot in defense and infrastructure. When viewed separately, private investments look significantly weaker. While state investments will increase by 2.7 percent this year according to the federal government's economic forecast, private investments will only grow minimally by 0.2 percent.
Next year the difference will be even greater: the state will increase by 6.6 percent and the private sector will increase by 1.9 percent. This could reverse in 2028 because the government stimulus will hardly change compared to the previous year.
However, the deficit of previous years cannot be made up. “It is crucial that we mobilize significantly more private capital,” say government circles.
4. Equipment investments: Industry is downsizing
In order to better understand the problems at the location, it helps to look at where the problems lie. Funds for new machines and equipment are becoming increasingly scarce in Germany. In 2025, these “equipment investments” were around 2.5 percent below the level of five years earlier. Only construction investments have developed even worse, with a decline of more than 15 percent.
“The weakness of the industry at the location is clearly evident here,” says DIW economist Dany-Knedlik. Production would be reduced. And where new investments are made, it would primarily relate to research and development as well as service, and no longer to production.
This can be seen in the significant increase in “other investments”, which lists investments in research and development, software and licenses. “The investment boom in AI is likely to be behind this,” said Dany-Knedlik.
5. Production potential: Capital stock continues to depreciate
The extent to which the lack of investment is a problem for the location is reflected in the production potential. This indicates what an economy can achieve on its own.
It consists of three components: technological progress, which is low in Germany compared to other countries. The volume of work, which continues to decline due to demographic change. And the capital stock, which can hardly compensate for the other two.
The capital stock, in turn, consists of investments minus depreciation, for example when machines wear out or are no longer of any use. By 2031, the five leading economic research institutes estimate that the capital stock will only contribute 0.26 percentage points annually to potential growth. In recent decades this has been many times higher.
6. Reasons: German companies
The bottom line is that Germany is not finished as an investment location, but it does have some problems. This is particularly true for domestic companies. In a survey conducted by the European Investment Bank among 600 companies, the main obstacles cited were a lack of skilled workers and high energy costs.
The domestic economy demands greater efforts on these issues. A summit for more investment from abroad is right, said ZVEI President Hager, but demands: “Mr Chancellor, why not organize an investment summit for domestic industry!” An active industrial policy is needed for more competitiveness.
7. Reasons: foreign companies
When it comes to investment barriers for outside investors, the reasons are somewhat different, according to a survey by the federally owned location company GTAI among 1,800 companies from the USA, Great Britain, France, Japan and South Korea. The main problems cited there are excessive operating and wage costs as well as over-regulation.
