A tradition of entrepreneurialism and innovation, a highly skilled workforce and easy access to a huge consumer market are just three of the reasons many international businesses choose to set up in Germany.
“Germany is the number-one destination for foreign direct investment in Europe – and it is a great place to live and to do business in.” – Torsten Schrimpf, Partner and International Business Centre Director, Grant Thornton in Germany.
As Europe’s powerhouse economy, with a highly skilled workforce and wealthy consumer base, Germany is an ideal base for businesses of all types and sizes. As the world’s fourth-largest economy, not only does the country have a domestic population of 83 million, it also enables direct, unfettered access to 500 million potential customers across the European Union free-trade zone.
Germany has an internationally respected education system founded on a strong, long-standing focus on vocational training which is applied across a wide range of industries, as well as in the public sector. This approach underpins Germany’s reputation for competence, efficiency and productivity.
Understandably, the country is a magnet for foreign direct investment (FDI) – indeed, this part of the economy employs over 10% of the German workforce.
“Germany’s success has been based not just on its world-leading innovative and entrepreneurial spirit, but also on strong legal foundations. For example, we have very strict intellectual property laws – so if a company wants to engage in research and development, it makes sense to do it in Germany because we have the skills and we have the legal protection.” Torsten adds.
Germany has a number of technology clusters based around research institutions and universities, as well as significant state support for innovation and new breakthroughs.
“There are a wide range of subsidy programmes run by bodies ranging from the EU to the national and federal governments, to local municipalities,” Torsten says. “We have also seen policies like purchase guarantees used in the development of Covid-19 vaccines. But the system of support for innovation is so complex that we would recommend companies talk to specialist advisors in this area.”
Germany is also seen as an ideal location in which to set up advanced manufacturing facilities: indeed, electric car maker Tesla is currently setting up a new ‘Gigafactory’ near Berlin to produce batteries for its vehicles. Tesla’s arrival will only add to the importance of Germany’s world-leading motor manufacturing sector, which is supported by a ‘Mittelstand’ of medium-sized – and often family-owned – companies famed for their innovation and technical precision.
Germany has a highly business-friendly environment: setting up a new entity is straightforward, and – as mentioned above – there is a strong and fair legal framework in place. “At Grant Thornton, we have developed a toolkit for overseas businesses to help them set up here,” Torsten explains. “This might involve helping obtain the necessary approvals from local governments, for example.”
There are very few legal restrictions on foreign businesses’ ability to buy real estate, he adds, and an official legal property register provides strong protection for owners. However, compared to some of its neighbours such as the Baltic states of Lithuania, Latvia and Estonia, the development of digital public administration services currently lags some way behind.
Historically, German banks have been reluctant to lend to riskier, more innovative businesses, but there are now numerous sources of funding from venture capitalists and private equity funds to the stock market in Frankfurt.
The country’s international connections are excellent. as well as a major port in Hamburg, Duisburg in the north-west of Germany has rail connections to Asia and the Far East. There are major airports across the country, in Frankfurt, Munich, Berlin, Duesseldorf and Cologne/Bonn, for example, while internal transport is facilitated by an excellent rail and high-speed road network connecting all the important regions.
The key growth sectors in Germany at present include healthcare and medical devices, plastics and fintech. “We have seen an influx of financial services companies over the past few years as a result of Brexit, with many businesses setting up entities here or moving away from London entirely,” Torsten says. With the UK no longer enjoying tariff-free access to the EU market, setting up in Germany will make even more sense for businesses across all sectors of the economy.
Grant Thornton has recently set up a Japan desk, reflecting the number of Japanese businesses that either have set up in Germany or are looking to do so. “A number of Japanese manufacturers already have facilities here, as well as sales and service entities,” he adds. “Our Japan desk means we can offer them a more specialist service.”
Access a world of resources, connections and expertise to help your international plans
Selling into, supplying or setting up operations in Germany can be a step into the unknown. At Grant Thornton, we have the experience to guide you. Our International Business Centre directors can co-ordinate access to international teams, resources and global delivery, while also helping you forge valuable trading relationships in the German market.
Torsten Schrimpf
Partner & International Business Centre Director
Grant Thornton Germany
T +49 211 9524 8557
E torsten.schrimpf@wkgt.com
