A new study by the Vereinigung der Bayerischen Wirtschaft (vbw) has raised concerns about the future of Bavaria’s industrial base. According to the report, an increasing number of Bavarian firms are preparing to move production out of Germany in the coming years — a development economists warn could accelerate deindustrialization in one of Europe’s strongest regions.
The survey, conducted by IW Consult, questioned 500 companies across the Free State. Around one in four expects a decline in domestic production by 2027, while 7% even anticipate shutting down their production in Germany entirely. Conversely, more than 20% of respondents believe the share of companies producing abroad will rise significantly over the next two years.
Rising foreign investment, shrinking domestic output
The vbw’s analysis highlights two primary factors driving the relocation trend:
- Cost advantages abroad, and
- Competitive disadvantages in Germany itself.
- These reasons, according to the study, outweigh other motives such as better market access or the avoidance of import tariffs.
“We are witnessing a worrying development,” said vbw Managing Director Bertram Brossardt. “Our international competitiveness has eroded, and we are paying a high price in the form of growing deindustrialization.”
The findings echo a broader sentiment among German industry leaders who have warned for months that high taxes, energy prices, and bureaucracy are undermining Germany’s appeal as a business location.
Trend not new — but accelerating
Although the results sound alarming, the shift is not entirely new. Since 2013, foreign direct investment by Bavarian companies has grown faster than overall German exports — a clear indication that firms are looking abroad for growth and stability.
The United States remains the most popular destination, accounting for 27.3% of Bavaria’s total foreign investments, followed by other key markets in Europe and Asia.
Declining competitiveness across German industry
The relocation trend isn’t limited to Bavaria. A separate survey by the Ifo Institute, published just a day earlier, paints a similarly bleak picture: more than one-third of German companies consider their competitiveness against non-European rivals to be declining.
Economists warn that if the trend continues, Germany’s manufacturing sector — once the backbone of the national economy — could face long-term erosion, with ripple effects across jobs, supply chains, and regional prosperity.
Calls for action
The vbw and other business groups are urging policymakers to take immediate measures to restore competitiveness, including:
- Lowering energy and corporate taxes,
- Reducing administrative red tape, and
- Strengthening incentives for domestic investment.
Without decisive reforms, experts caution, even high-tech and export-driven industries may find it increasingly difficult to justify keeping their production lines in Germany.
