British Business Investment in Germany Rebounds in 2021
From summer 2021 most COVID restrictions were lifted in the UK, marking a gradual, ongoing return to normalcy. A number of companies took the opportunity to revisit and restart investment projects in Germany that had been put on hold. According to Germany Trade & Invest’s 2021 FDI Report, 140 firms set up operations in Germany last year – a significant increase on the 103 expansions in 2020 but still well below the post-Brexit peak of 185 in 2019. Robert Scheid, director of GTAI’s London Office, discusses the latest trends.
What are the key takeaways from the new figures GTAI released for 2021?
I think there are two important trends to highlight related to COVID and Brexit. The main driver of investment was the relaxing of COVID restrictions, both in the UK and in Germany. This allowed more business leaders to travel, conduct site visits, meet business partners and ultimately decide on investment projects that were previously on hold in the first year of the pandemic. The second trend is that the post-Brexit influx of companies is beginning to slow down.
So can you say that Brexit is essentially behind us?
Far from it. Large British companies and multinationals have mostly dealt with the effects of Brexit and typically already have a presence in the European Union. On the other hand, unfortunately a number of SMEs are still struggling with the complexities of trade, immigration and divergence of regulation.
What would you say is the most important takeaway from Brexit?
Well, first and foremost, companies still need a legal presence in the EU, so this is driving them to set up shop in Germany. The lockdowns and travel restrictions of the COVID pandemic covered over some of the complications related to travel and working between the UK and the EU. For example, British citizens now need a passport to travel to the EU and a residence permit in order to live and work in the EU.
What factors attract companies to expand to Germany?
There are several factors that attract British companies to Germany. Guaranteed access to the EU27 is surely one of them, but not the only reason. Germany is the largest market in Europe and its geographic heart, purchasing power is high and the legal framework is solid. Plus, you have the strong industrial base. And Germany’s new government has pledged to invest massively in areas such as digitalization, energy and e-mobility, so it’s quite an interesting time for companies to consider Germany.
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You said there were 140 British companies that set up shop in Germany last year. How does this compare with the rest of the world?
The UK ranks fourth as a source country for investment projects behind the USA (254 projects in 2021), Switzerland (219) and China (149), and just ahead of the Netherlands and France.
Are there any noticeable changes in global trends?
The biggest shift is that the UK is catching up to China very quickly. And if China continues its zero COVID policy and keeps the country closed this year, I predict the UK will surpass China as a source of FDI in Germany in 2022.
What were the most interesting investments from the UK this year?
I’ll give you two examples that illustrate various points. First, Vodafone invested nearly 100 million euros in a new R&D centre for secure networks, 5G and even 6G technology in Dresden. This is a fine example of Germany’s attractiveness as a high-tech research location and shows the recent successes in attracting international business to the former eastern parts of the country.
The American start-up electric truck maker Nikola invested 40 million in a joint project with Iveco in Ulm, in the traditional automotive belt of Baden-Württemberg. But the project came through Nikola’s UK offices, which shows that even in a post-Brexit environment, London remains a global business hub for innovative companies from around the world.
So are mainly large companies behind the latest investment projects?
No, they are the outliers. Most companies setting up a business in Germany from the UK are SMEs. The majority are working in areas like business services and software, which makes sense considering the number of innovative, rapidly growing start-ups in the UK. Last year we also saw an increasing number of healthtech companies entering the German market as well as several Brexit-driven logistics projects.
What advice would you give British companies considering Germany?
Get in touch with us. As much as I can comment on general trends, each business case is different. For this reason we offer bespoke support to all different kinds of companies in order to help them establish in Germany in a way that’s suitable for them.
Contact Rob in GTAI’s London Office at firstname.lastname@example.org or +44 7455 062620