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Companies expect loss of industrial production capacity in Europe

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Companies expect loss of industrial production capacity in Europe
Business Europe-wide survey

Companies expect loss of industrial production capacity in Europe

Barclays chief economist Christian Keller in conversation with Katja Losch

The European Central Bank has raised the key interest rate by a quarter of a percentage point: ECB boss Christine Lagarde has announced a further increase for July due to persistent inflation. Katja Losch talks about this with Barclays chief economist Christian Keller.

In a survey of more than 230 global companies, 30 percent of the companies surveyed indicated that they wanted to reduce production capacities in Western and Southern Europe in the next five years. Only in Eastern Europe does the trend look different.

IAccording to a study by management consultancy Horváth, internationally active industrial companies will reduce production capacities in western and southern Europe on a larger scale in the coming years. According to the study, which was available to the AFP news agency on Sunday, 30 percent of companies based in the region plan to cut staff or production facilities in the next five years. At the same time, they wanted to expand production capacities in North America and Asia, especially in India.

Overall, according to Horváth, the companies surveyed expect further global economic growth and a related expansion of personnel and production capacities. However, this does not benefit European locations, but factories in other regions of the world.

More about Germany as a business location

The main drivers behind the development are therefore Comparatively high personnel costs. In addition, companies are striving to bundle production and sales regionally for cost reasons. Asia, for example, is becoming increasingly important as a sales market. Another reason is the lack of workers and skilled workers in Europe.

More than 230 industrial companies surveyed

The study is based on surveys of more than 430 members of the management level of global companies about their strategic direction in the next five years. Among them were more than 230 industrial companies. Most companies generate more than one billion euros in annual sales.

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According to the study, Eastern Europe will remain in demand as a location due to lower personnel costs compared to Central, Western and Southern Europe. 58 percent of companies intend to continue investing there. However, the companies are mainly planning to expand their capacities in North America (71 percent) and Asia. Above all, India will benefit there, where 79 percent of the companies want to build up or expand capacities in the medium term.

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According to the analysis, countries such as Indonesia and Vietnam are also becoming increasingly interesting as locations for production plants, while China, as the formerly preferred production site, is becoming less relevant. At the same time, China is becoming more important as a sales market for companies, which is why 61 percent still want to expand their activities there. They only want to reduce eleven percent.

Once companies leave, they don’t come back

The study fits into growing debates about relocating industrial processes away from Europe. The solar cell manufacturer Meyer Burger recently announced that it would be expanding its production in the USA. He justified this with billions in subsidies. The industrial group Siemens in turn announced future investments of two billion euros, which will primarily flow into plants and research centers in China and Singapore.

Horváth study director Ralf Sauter warned: “In the coming years, significant relocations of production facilities and value chains from Western and Southern Europe to North America and Asia are imminent.” According to the study, Germany and other countries in Central Europe should improve their Improve energy costs and skilled workers at high pressure”. If companies left first, they would not come back.

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