An international company based in Germany has claimed that it is now cheaper to run a business in Switzerland than it is in the federal republic. German manufacturer Stihl announced that it had scrapped plans for a new factory in Baden-Württemberg, due to high costs and bureaucracy.

Companies finding it less attractive to invest in Germany

“Too much bureaucracy, comparatively high taxes and a shortage of skilled workers: the conditions in Germany are causing concern for many companies,” is how host Susanne Daubner opened the ARD news show Tagesschau on February 21. She continued by noting that many entrepreneurs were now looking away from Germany and towards investing in other countries.

The programme used the example of Stihl, one of the world’s major manufacturers of chainsaws. Founded near Stuttgart in the 1920s, the firm now operates factories around the world, including in Germany and Wil, Canton St. Gallen.

In the programme, Stihl confirmed that it was scrapping plans to build a new factory in Ludwigsburg, Baden-Württemberg and was looking to expand in other countries instead. The company cited bureaucratic and economic hurdles as the main reasons to look overseas.

Cheaper to run a business in Switzerland than Germany, say Stihl

Speaking to Tagesschau, company chairman Nikolas Stihl said that he would now much rather invest in Switzerland than in Germany, despite the country’s larger economic base and the fact that the nation resides within the EU. In explaining his comments, Stihl said that “total costs, which consist of duties, taxes, energy costs and so on, mean that production in Switzerland is now cheaper than in Germany.” 

This is despite the fact that salaries remain much higher in Switzerland than in Germany. The latest data from the Swiss Federal Statistical Office revealed that the gross median salary for a full-time worker in Switzerland was 79.980 francs a year in 2020. In the same year (using exchange rates from the time), the median German salary stood at 45.567 francs a year, according to data from the Federal Employment Agency.

German economy remains under severe pressure

The reduction in company investment is reflected in the latest data, with Germany recently falling into a recession for the second time in two years. A report from the Institute of German Economics in Cologne (IW) estimated that the economy has lost 545 billion euros in value over the last four years - in the meantime, the Swiss economy has grown, albeit slightly, in every year since 2020.

During the last four years, residents and companies in Germany have invested 400 billion euros less than the four years prior, with companies spending 155 billion euros less on new equipment, facilities and other investments. IW study author Michael Grömling noted that in the long term, this reduces the country’s ability to “deal with challenges such as digitalisation, a shortage of skilled workers or climate change.”

German company head blames bureaucracy for economic decline

When it came to why the cost for companies in Germany is so high, Stihl suggested that bureaucracy was the main issue. He claimed that of the 6.000 people working in Germany for the company, 5.000 are given bureaucratic tasks such as filling out forms or documentation in addition to their regular work.