Foreign Direct Investment in Germany Plummets for Eighth Consecutive Year Amid Economic Hurdles

Germany is facing a marked decline in foreign direct investment (FDI), with foreign investment projects dropping to 548 in 2025—a 10% decrease from the previous year—marking the eighth straight year of decline to the lowest level seen since 2009. Consulting firm EY's CEO, Henrik Ahlers, described this trend as an "alarmsignal for the Standort Deutschland," underscoring the country's deteriorating appeal as an investment destination compared to other major European economies.

Since peaking in 2017, Germany has witnessed a precipitous 51% decline in foreign investment projects, a drop unmatched by other leading European nations. The downturn is attributed primarily to Germany's high tax burden, costly energy prices, steep labor costs, and a cumbersome bureaucracy. Ahlers emphasized that the country's "reformunfähigkeit"—or inability to reform—is well known internationally, and the once-strong image of Germany as a hub of quality and economic stability has significantly eroded.

Moreover, this investment slump is mirrored by German companies reducing their international investment activities, with projects abroad falling by 24% to 484 in 2025—the largest decline since data collection began in 2006. Overall, Europe experienced a 7% drop in foreign investment projects last year, registering its lowest level in over a decade. While countries like France and the UK demonstrated temporary upticks in investment, Germany’s continuous downward trajectory sets it apart negatively.

EY’s analysis contrasts Germany’s situation with other European nations that have successfully streamlined their public administration and tax frameworks to maintain or enhance investment attractiveness. The combined challenges of elevated taxes, high labor and energy costs, and bureaucratic inefficiencies have thus heavily diminished Germany’s international investment allure, signaling an urgent need for strategic reforms to reverse the trend.