VCI Survey: East German Chemical Industry Wants to Cut Investments and Relocate Abroad

The assessment of the federal government is significantly more critical in East Germany: 65 percent of the East German participants surveyed rate the work of the federal government as "poor" or "insufficient." The EU Commission is also graded "poor" or "insufficient" by 75 percent of East German participants.

High Costs and Bureaucracy as Core Problems

The companies cite high costs as the central investment obstacles: 60 percent see high raw material costs as well as taxes and levies as an obstacle, 50 percent cite energy costs. The fertilizer manufacturer SKW Piesteritz warns, for example, that particularly energy-intensive fertilizer production in Germany is losing competitiveness due to high energy prices.

In addition, there are bureaucratic burdens and lengthy procedures: 85 percent of companies regard bureaucracy and regulation as a heavy or very heavy burden. 55 percent of companies see approval procedures as an obstacle. Seven out of ten also see this as the greatest obstacle to innovation. Three quarters of companies also take a critical view of energy and climate policy.

The consequences for investment plans are considerable. Only one in ten companies wants to expand its investments at home. Every second East German company plans to cut investments in 2026 and 2027. More than a third of East German chemical firms want to shift investments entirely or partly abroad. Nine out of ten companies rate the high costs in Germany as a rather or strongly negative influence on their investments.

Subdued Expectations for Revenue and Earnings

Expectations for revenue and earnings are also subdued: half of the companies expect declining profits, and only one in five expects an improvement. Regarding revenue, 45 percent each expect an increase or a decrease. According to the VCI, production in the chemical-pharmaceutical industry in the first half of the year was three percent below the previous year's figure. According to the association, investments in the sector have fallen for the third year in a row.

Reactions from the Industry

Nora Schmidt-Kesseler, Chief Executive of VCI Nordost, says: „Unsere Unternehmen verlieren nicht den Mut zu investieren - sie verlieren das Vertrauen in die Standortbedingungen." She adds: „Deutschland kann sich im internationalen Wettbewerb dauerhaft hohe Standortkosten nicht leisten." She thus sums up the industry's concern: it is not a lack of willingness to invest, but rather a lack of confidence in the framework conditions that is driving relocations.

According to its own statements, the VCI has not disclosed which specific companies want to cut or relocate investments. Individual sites are already under pressure: Polyamid GmbH, founded as a restructuring company for the insolvent Domo plants, continues to fight for a long-term future for the Leuna site following its own insolvency. Against the trend, the pharmaceutical company Merz recently announced an investment of more than 100 million euros at the Dessau-Roßlau site and the creation of around 150 additional jobs, according to its own statements.

According to the VCI, the chemical industry manufactures indispensable everyday products – from fertilizers and plastics to medicines. If the trend toward investment restraint and relocation abroad were to solidify, this could have an impact on value creation, employment, and supply in East Germany and beyond. The survey suggests that many companies are primarily waiting for lower energy and raw material costs, faster approvals, and less bureaucracy before making investment decisions in favor of Germany.