Sachsen Surpasses Bayern as Germany’s Top Business Location in 2026 Study

A recent study by the Mannheim Research Institute ZEW has revealed a significant shift in the business attractiveness rankings of German federal states, with Sachsen overtaking Bayern as the most favorable location for companies in 2026. Commissioned by the Stiftung Familienunternehmen, the study evaluated thirteen federal states based on various factors including work and human capital, financing, infrastructure, taxes, and institutional performance.

Sachsen’s rise to the top spot was attributed to its strengths in workforce quality, financial conditions, and infrastructure improvements. Conversely, Bayern, which held first place in 2022, dropped to fifth, primarily due to a decline in infrastructure quality and several subcategory ratings despite maintaining its leading position in tax competitiveness. The study also highlighted Bayern’s poor ranking in childcare (12th place), alongside Baden-Württemberg’s 13th place standing in the same category.

Niedersachsen showed the most dramatic improvement, leaping from 10th to 3rd place. The traditionally wealthier western states are losing some ground but remain competitive, with Baden-Württemberg also dropping in the rankings. The city-states were assessed separately, with Berlin ranking highest, followed by Hamburg and Bremen.

The report further noted the erosion of the economic divide once marked by Germany’s historical division, as eastern states make notable gains. Rainer Kirchdörfer, board member of the Stiftung Familienunternehmen, commented that the findings demonstrate positive economic trends in some eastern regions.

Bayern continues to lead in future-oriented budget allocations, particularly in education, science, research, and culture, emphasizing investments for long-term economic growth. However, its overall institutional ranking fell, reflecting challenges in administrative efficiency and cultural offerings.

This comprehensive study underscores changing dynamics in Germany’s economic landscape, marking a pivotal moment for Sachsen as it establishes itself as the new leader among federal states competing to attract business investment.