East German chemical firms plan to cut investments as costs and bureaucracy bite, VCI survey shows
A VCI survey of eastern German chemical companies shows that 50% plan to reduce domestic investment in 2026-2027, with more than a third shifting spending abroad, citing high costs and stifling bureaucracy.
Investment plans sour
Half of the eastern German chemical and pharmaceutical companies surveyed by the VCI intend to scale back their investments in Germany during 2026 and 2027. More than one in three firms plans to relocate investments partly or entirely abroad. Only one in ten companies expects to expand domestic spending. The survey covered roughly 20 eastern participants drawn from a nationwide pool of about 250 respondents, with the industry association representing some 2,000 businesses overall.
Our companies are not losing the courage to invest - they are losing trust in the location conditions.
The poll was conducted a few weeks ago. Nationwide, production of the chemical-pharmaceutical industry fell three percent in the first half of the year compared with the same period a year earlier, and overall investment declined for the third consecutive year.
What holds firms back
High costs in Germany emerged as the largest single barrier. Nine out of ten respondents said costs exert a strongly or rather negative influence. Three-quarters are critical of energy and climate policy, and 85 percent regard bureaucracy and regulation as a heavy or very heavy burden. Seven in ten see red tape as the biggest obstacle to innovation, while 60 percent each point to high raw-material costs and taxes and levies. Additionally, 55 percent cite sluggish permitting and 50 percent name energy costs themselves.
- High costs overall
- 90 %
- Bureaucracy/regulation
- 85 %
- Energy/climate policy
- 75 %
- Raw material costs
- 60 %
- Taxes and levies
- 60 %
- Approval practices
- 55 %
- Energy costs
- 50 %
A divided sector
Not every segment is equally affected. Fertiliser producer SKW Piesteritz warned that energy-intensive fertiliser manufacture is losing competitiveness because of high energy prices. In Leuna, the Polyamid GmbH, formed as a rescue vehicle for the insolvent Domo works and now itself insolvent, is still battling for a long-term future at the site. In contrast, the pharmaceuticals segment remains relatively robust. The pharma group Merz recently announced an investment of more than 100 million euros at its Dessau-Roßlau site, creating around 150 additional jobs.
Darkening expectations
Business expectations reflect the gloom. Half of the surveyed firms anticipate falling earnings, while only one in five expects an improvement. Revenue forecasts are split: 45 percent foresee an increase and an equal share predict a decline.
Policy grades and demands
Confidence in economic policy is low. On a school grading scale, 65 percent of eastern respondents rate the federal government as “deficient” or “unsatisfactory”, and 75 percent give the same marks to the European Commission. Nora Schmidt-Kesseler, chief executive of VCI Nordost, said that to keep investments in Germany, the country needs reliable framework conditions, less bureaucracy, faster approvals and competitive energy prices. She added that Germany cannot permanently afford high location costs in global competition.
