Machine and Plant Engineering Companies plan Relocations

A high proportion of those planning to restructure are considering fundamental changes: 58% want to strategically realign their business, 42% each want to relocate sites and reduce staff, and one in four is planning to cut production and service capacities.

Of those who have already started restructuring, 31% are already reducing their workforce and 23% are reducing their production capacities. 8% have actively started to relocate. One reason for the discrepancy between planning and implementation: 70% cited geopolitical instability as the biggest challenge for their industry alongside the shortage of labor and skilled workers. Across all industrial sectors surveyed - automotive, mechanical and plant engineering and consumer goods - geopolitical instability only came in sixth place.

"This data not only reveals the mood, but also shows what concrete plans the companies surveyed are pursuing and where they are already taking action," says Karsten Schulze, CEO of FTI-Andersch, the consulting unit of FTI Consulting in Germany that specializes in restructuring, business transformation and transactions. "They underline the significantly reduced attractiveness of Germany as a business location and at the same time show that the previous export-oriented economic model has reached its limits. Minorities are still cutting jobs, planning relocations and removing capacities from the market. However, these minorities are so significant that they will have a considerable impact on our economy and the people working in it."

Companies prepare for insolvencies in Germany

40% of the companies surveyed say that they are seeing (significantly) more frequent insolvencies in their sector, with 14% even expecting a 'wave of insolvencies'. Accordingly, 43% are preparing for the loss of significant sales volumes from insolvent customers and 29% expect supply chains to break down. This is why four out of five (80%) of the machine and plant engineering companies surveyed want to tap into new markets, while 58% want to expand their customer base outside their current target sectors.

"If the geopolitical situation wasn't so uncertain, more machine and plant engineering companies would probably have already started relocating," says Karsten Schulze. "However, many are aware that the situation could be complex and that they still have to act. Once the decision to plan relocations has been made, they have a high chance of being implemented. And once the relocation has taken place, the respective capacities will not return for years, as these investments must first be amortized. It is also questionable whether the attractiveness of the location will improve again in a few years' time."

Germany as a business location needs new framework conditions

This is because machine and plant engineering companies cite location policy as the main challenges for their business: Labor and skills shortages (70%), bureaucracy (68%), energy prices (64%) and general competitiveness factors such as infrastructure (58%). By 2030, 28% of respondents will lose more than 20% of their workforce. One in four (27%) machine and plant engineering companies state that they expect to be able to replace less than half of their retiring employees.

"The fact that some companies are now taking such radical action is understandable and absolutely necessary from a business perspective," says Karsten Schulze. "At the same time, we must not forget that the mechanical and plant engineering sector in particular is characterized by medium-sized and family-run businesses and therefore has strong personal ties to Germany as a business location. It is therefore all the more significant that this sector also expects to be more successful in other locations to such a high degree today."

Karsten Schulze: "Entrepreneurs and management must base their decisions solely on the well-being of their own company and its stakeholders. At the same time, we keep hearing from companies that they want to remain loyal to their location because of their roots. However, politicians must now quickly set a new framework to make Germany attractive for investment again. Otherwise, we will no longer see a minority in the next surveys, but a majority that is downsizing, relocating and shrinking individually in order to maintain its competitiveness."

About the investigation of Verian:

The market research company Verian (formerly: Kantar Public) was commissioned by the management consultancy FTI-Andersch to conduct a telephone survey of 200 companies in Germany from the automotive, mechanical and plant engineering, consumer goods and retail sectors on current issues relating to the economic outlook, restructuring, insolvencies, refinancing and other structural challenges as part of the 'German Economic Pulse' study. The companies have a turnover of at least 50 million euros. Around a quarter of the companies surveyed generate more than 500 million euros a year.
FTI-Andersch is a management consultancy that supports its clients in the development and implementation of viable future/performance and restructuring concepts.