KPMG Survey: Germany's Investment Appeal Hits 7-Year Low

(MENAFN) Germany's appeal as a destination for foreign investment has sunk to its weakest point in nearly a decade, according to a sweeping new survey released Wednesday by KPMG, as mounting concerns over energy costs, red tape, and crumbling infrastructure erode the country's standing among global business leaders.

The findings, drawn from KPMG's flagship Business Destination Germany 2026 report, reflect the views of 400 chief financial officers overseeing major German subsidiaries of international firms across the world's eight top investor nations.

KPMG's proprietary location index — which benchmarks Germany against fellow European Union member states across more than 20 competitive indicators — plummeted to just 0.2 points in 2026, a sharp retreat from 1.2 in 2023 and a dramatic fall from 3.1 in 2017, on a scale stretching from +10 to -10. The reading now leaves Europe's largest economy barely above the EU average.

Germany retains certain foundational strengths: its vast market size, public safety record, political stability, and capacity for innovation continue to draw praise. Sixty percent of surveyed executives reported using Germany as their European base of operations, while 63% also coordinate business activity beyond Europe from within the country.

Yet structural fault lines are widening. Seventy percent of CFOs placed Germany among the five weakest EU nations on regulation, and nearly a third — 29% — ranked it dead last, making bureaucratic overload the single most deteriorated factor in the index.

Energy affordability emerged as an equally pressing liability. Nearly half of respondents — 43% — identified Germany as the EU's weakest performer on competitively priced energy, with an additional 26% placing it among the bottom five. Digital infrastructure fared no better, with 69% ranking Germany among Europe's five weakest countries in that category. Physical infrastructure perceptions also worsened, while taxation complexity and immigration policy drew notably sharper criticism than in prior editions of the survey.

The outlook, however, is not entirely bleak. The report identified a cluster of medium-term catalysts — including government reform initiatives, the ongoing energy transition, accelerating digitalization, demographic shifts, and planned investments in infrastructure and defense — that could reverse the slide.

Critically, 48% of the companies surveyed said they anticipate their business conditions in Germany improving over the next five years, a sign that long-term confidence in the country's fundamentals has not been extinguished.

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