Choosing your business location is a crucial step in starting or expanding your business.
Germany as a business location has many benefits – it is the economic powerhouse of Europe, with a central location and a leading innovation landscape. However, Germany is a large entity, split into federal states and regions which vary in their economic structure.
In order to choose the right location for your business, you must consider a number of factors that will inform your decision.
Is Germany a good place to do business?
- Germany is the main driver of Europe’s economic growth and investors can benefit not only from the huge domestic market demand, but also the close access to the rest of Europe.
- The combination of cost-effective production and a highly skilled workforce make it a strong competitive location for businesses.
- Germany is at the forefront of innovation, being Europe’s top location in patent applications making it a leader in high-technological discoveries.
- Germany has overtaken the US to become the leading destination country for inbound foreign direct investment (FDI), recording 1,537 projects in 2021, according to the Global FDI Annual Report 2022.
Overview of locations in Germany for your business
There are too many states and regions in Germany to list in this article, but we have given an overview of the top five locations according to the latest report from The Hamburg Institute of International Economics (HWWI).
Factors analysed in this report include the cities present economic performance, their future demographic development and key business factors like education & innovation, internationality, and accessibility.
Berlin has climbed to the top of the 30 largest cities, after coming fifth in 2017. The German capital is the only eastern state that made it into the top five.
The capital achieved a high percentual population growth (+4.1%) and high employment growth (+6.8%). The report also notes a noticeable improvement in productivity and good location factors.
Saxony’s largest city, Leipzig, retained its ranking in second position, whilst closely missing first place. The city’s improvement in economic performance is unmatched compared to other locations.
It has also seen the largest population growth at just under 7% compared to the other 30 cities in the list. This growth is set to continue, with predictions through to 2030 showing Leipzig as a leader especially in terms of under-20s and people of working age.
The availability of skilled workers will become a critical element in drawing business to the city, as the attractiveness of a location will progressively depend on the expansion of its working-age population.
The Bavarian state capital of Munich lost its first position held in 2017 and 2015, dropping to third place in the rankings. This is the first time the state capital has seen a limit to its growth.
However, the city still grew robustly and had the highest productivity out of the others. Munich has a high proportion of highly skilled workers and knowledge intensive industries, which puts the city in an advantageous position, despite steadily rising business and living costs.
Frankfurt am Main
Frankfurt am Main has a high proportion of academically educated employees with good accessibility and internationality.
Also, the demographic predictions for under-20s and people of working age are excellent for this financial centre.
Cologne offers a good balance of business and quality of life factors. Similar to Hamburg (which ranks as the 6th best location in Germany), Cologne has been a consistent performer in economic performance, future demographic development, and key business factors such as education & innovation, internationality, and accessibility.
Why choose Leipzig for your business location?
When considering where to locate your future business, it is vital to consider the city’s future economic prospects as well as their demographics and the availability of a skilled workforce. Saxony provides good framework conditions in the location factors “labour and human capital” to provide an indication of the future availability of labour (across Germany).
Leipzig has 11 universities in the region, with over 40,000 students. The region has also seen a 19% increase in population since 2010, with a massive 29% employment growth in the same period. The Leipzig Region of Germany is thriving – but most importantly, it still has room to grow.
Accordingly, this makes Leipzig a worthy choice for your business location. Invest Region Leipzig offers location services for businesses looking to relocate or, open a new branch in the Leipzig region of Germany. The location services provided by Invest Region Leipzig cover development of location criteria, identification of suitable commercial spaces, presentation of locations, site visits and networking opportunities within the regional business and research community