Why Businesses Are Leaving Germany
May 6, 2026 · Frisian News
German companies and foreign firms are relocating to cheaper countries as energy costs, labor regulations, and tax burdens squeeze margins. The exodus signals deeper problems in Europe's largest economy that Berlin has not addressed.
Last month, Volkswagen announced plans to close three factories in Germany and cut 37,000 jobs by 2030. The automaker cited high wages, expensive energy, and German bureaucracy as reasons it could no longer compete with manufacturers in Eastern Europe and Asia. Volkswagen is not alone. Bosch, Siemens, BASF, and smaller industrial firms have all signaled plans to shift production or expand operations elsewhere.
Energy costs remain the main culprit. German electricity prices still run two to three times higher than in the United States or Poland. While energy prices have fallen from their 2022 peaks, Berlin has not fixed the underlying problem: overreliance on weather-dependent renewables without adequate backup capacity and heavy restrictions on nuclear and gas. This forces companies to pay what amounts to a hidden green tax whenever they run a factory.
Labor rules add another layer of friction. German wages are high, which workers earned through decades of strong unions and collective bargaining. But the flip side means employers must contend with strict employment protections, long notice periods for layoffs, and mandatory works councils that slow decision-making. A factory manager in Baden-Württemberg cannot move fast enough to compete with a Hungarian or Polish counterpart operating under simpler rules.
Berlin's tax burden worsens the math. Corporate tax rates, combined with trade and local levies, still exceed 30 percent in many cases. The government claims to support industry but keeps creating new rules and compliance costs that smaller firms especially cannot bear. Meanwhile, competitors in Ireland, Hungary, and the Netherlands offer lower rates and less red tape.
The exodus will not reverse quickly. Germany built its postwar wealth on industrial strength and quality exports. That engine sputters now. The country spent years pursuing green ideology and enlarging the state without asking whether companies could still afford to stay. They cannot, and no election cycle will convince them to return if Berlin does not cut costs and regulations in real terms, not words.
Published May 6, 2026 · Frisian News