High energy costs and uncertainty about energy supply have prompted four out of ten German manufacturing firms to consider either relocating production abroad or limiting it in Germany, a new survey showed on Thursday.
In addition, more than half of Germany's industrial firms employing 500 people or more are now considering moving production outside Germany or limiting production in Germany, according to the Energy Transition Barometer 2024 published by the Association of German Chambers of Industry and Commerce, IHK.
German manufacturing companies, especially the energy-intensive industries, have been struggling with high energy costs since 2022 when energy prices soared following the Russian invasion of Ukraine.
Commenting on the results of the survey, the association's deputy managing director Achim Dercks said "The trust of the German economy in energy policy has been severely damaged."
"Policy makers have failed to show companies that they can have reliable and affordable energy supply," Dercks added.
The high energy costs have been a key reason for weak manufacturing and industrial activity in Germany over the past two years. Energy-intensive industries, especially chemicals and fertilizers, have been hit the hardest.
"The German industry has almost lost a decade's worth of growth in production," the Federation of German Industries, BDI, the industry body, said in a report in May.
Germany's industry is unlikely to fully recover from the energy price shock and return to the competitiveness from before the Russian invasion of Ukraine, the chief executive of Germany's top utility, RWE, told the Financial Times in April.
"The German industry has a disadvantage," RWE's chief executive officer Markus Krebber told FT, noting that Germany is now seeing structurally higher energy prices as it depends on LNG imports.
Despite reducing significantly its dependence on Russian gas, Europe remains exposed to natural gas supply and price shocks as it lacks any buffers in the system, Krebber told FT at the end of last year.
By Charles Kennedy for Oilprice.com
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