Current study: Machinery and plant manufacturers plan relocations / Half are planning or already implementing restructuring

This is the result of a survey conducted by the market research institute Verian (formerly: Kantar Public) on behalf of the management consultancy FTI-Andersch.

• 43 percent expect significant loss of sales due to customer insolvencies
• Location factors are viewed negatively
• By 2030, 28 percent of respondents will lose more than 20 percent of their employees

Those who have already begun restructuring are already cutting jobs (31 percent) and reducing production capacity (23 percent). Only eight percent have actively begun relocating. One reason for the discrepancy between planning and implementation: in addition to the labor and skills shortage, 70 percent cited geopolitical instability as the biggest challenge for their industry. By comparison, across all the industrial sectors surveyed (automotive, mechanical and plant engineering, consumer goods), geopolitical instability only came in sixth.

“These data not only reflect the mood, but also show the specific plans of the companies surveyed and where they are already taking action,” says Karsten Schulze, Senior Partner and Board Member of FTI-Andersch, FTI Consulting's restructuring, business transformation and transactions specialist consulting unit in Germany. “They underscore the significantly diminished attractiveness of Germany as a business location and at the same time show that the previous export-oriented economic model has reached its limits. It is still only a minority that is cutting jobs, planning relocations and taking capacities out of the market. However, these minorities are so significant that they will have a considerable impact on our economy and the players in it.”

Companies are preparing for insolvencies in Germany

40 percent of the companies surveyed say that they are observing (significantly) more insolvencies in their industry, while 14 percent even expect a 'wave of insolvencies'. Accordingly, 43 percent are bracing themselves for the loss of significant sales volumes of insolvent customers and 29 percent expect supply chains to break away. That is why four out of five (80 percent) of the machine and plant manufacturers surveyed want to enter new markets, while 58 percent want to expand their customer base outside their current target industries.

“If the geopolitical situation were not so uncertain, more machine and plant manufacturers 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 has been made to plan relocations, there is a high chance that they will be 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 be better again in a few years.”

Germany as a business location needs new framework conditions

The challenges for their business that mechanical and plant engineering companies cite are mainly issues that can be traced back to location policy: labor and skills shortages (70 percent), bureaucracy (68 percent), energy prices (64 percent) and general factors for competitiveness such as infrastructure (58 percent). By 2030, 28 percent of respondents will lose more than 20 percent of their employees. One in four (27 percent) mechanical and plant engineering companies say they will probably be unable to replace more than half of the employees who retire.

“From an operational point of view, it is understandable and absolutely necessary that some companies are now taking such radical action,” says Karsten Schulze. “It should not be forgotten that mechanical and plant engineering companies are often medium-sized and family-owned and therefore have a strong personal connection to Germany as a business location. This makes it all the more telling that this industry, too, now expects to be more successful in other locations.”

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 repeatedly hear from companies that they want to remain loyal to their location because of their roots. However, to do that, policymakers must quickly establish a new framework to make Germany attractive for investment again. Otherwise, the next surveys will show not a minority but a majority that is cutting back, relocating and shrinking in order to maintain its competitiveness.”

About the Verian Study:

The market research company Verian (formerly Kantar Public) conducted a study called ‘German Economic Pulse 2024’ on behalf of the consulting firm FTI-Andersch. It surveyed 200 companies in Germany from the automotive, machinery, consumer goods, and retail sectors by phone about current economic outlooks, restructuring, insolvencies, refinancings, and other structural challenges.

The companies surveyed have a minimum annual turnover of €50 million, with around a quarter generating over €500 million annually.

About FTI-Andersch:

FTI-Andersch is a management consultancy that supports its clients in the development and implementation of sustainable future/performance and restructuring concepts. FTI-Andersch actively supports companies that have to deal with strategic, operational or financial challenges and transformation processes – or want to align their business model, organization and processes for the future at an early stage.

Clients include medium-sized companies and large corporations. FTI-Andersch is part of the FTI Consulting Group (NYSE: FCN), which has more than 8,000 employees worldwide.

FTI-Andersch AG

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