A pillar of strength in troubled times?

Transcription

1 Growing Beyond A pillar of strength in troubled times? Ernst & Young's 2012 attractiveness survey Germany Extract report

2 Executive summary Germany is Europe s top business location. Approval of Germany has risen, since, by one percentage point to 13%. Nevertheless, Germany has slipped from fifth to sixth place in the ranking of countries as business locations behind China, India, the United States, Russia and Brazil. Germany s European competitors are behind. Poland and the United Kingdom still rank in the top ten, with 6% each; France was cited by just 3% of those polled. Highly rated for infrastructure, workforce skills and social and political stability. Germany performed better than in the previous year in every category even labor costs, flexibility of labor law and corporate taxation now attract more praise than criticism. Good prospects for Germany. 50% of those polled expect Germany s appeal to increase further over the next three years, with only 12% expecting it to develop somewhat negatively. The automotive and IT industries have the best prospects. One in three managers view the automotive industry as a significant driver for growth in Germany, with information and communications technology playing a major role in securing Germany s status as a business location according to 29% of those polled. The number of foreign investment projects in Germany continues to rise. In, 597 projects by foreign investors were recorded 7% more than in. The average increase across Europe was 4%. Only the United Kingdom recorded more investment projects than Germany. Foreign investors create more jobs in Germany. Investment projects reported in Germany in led to the creation of 17,300 jobs an increase of 42% from the previous year (against a Europe-wide average increase of 15%). Once again, the United Kingdom is the only country ahead of Germany in the ranking. Chinese companies primarily invest in Germany. Thirty-two percent of investment projects implemented in Europe by Chinese investors are in Germany. The United Kingdom (16%) and France (10%) rank significantly lower than the Federal Republic of Germany as locations for investment by Chinese companies.

3 A pillar of strength in troubled times? Ernst & Young's attractiveness survey 2012 Germany (extract report) Peter Englisch Lead Partner for Strategic Growth Markets in Germany, Switzerland and Austria Ernst & Young Foreword In an environment that could hardly be less favorable, Germany is experiencing a renaissance as a business location: economic output is rising despite a downturn at the end of the year; many flagship German companies are reporting the best quarters in their history; tax revenue is booming and a balanced budget is within reach. Unemployment is constantly declining, making vacancies harder and harder to fill. There is a dramatic, growing distinction between the public perception of Europe s prosperous north, with Germany at its center, and the debt-ridden southern member states. Germany is a driving force for the economies of its neighbors via close trading links with them. Due to their weak industrial sectors, however, southern countries cannot benefit from Germany s robust economic development or the ongoing boom in emerging markets. There is no obvious solution to this structural problem. Germany s strength creates the expectation that it will contribute to solving the European crisis, but is its strength sometimes overestimated? Despite the success stories, the German economy is affected by the crisis both through the global economy and especially through the very tightly integrated European Union, where recession in other important European countries has a measurable effect on economic performance in Germany. What does Germany s positive image mean for the country as a location for investment? Will a growing number of foreign investors now be making their way to Germany and setting up distribution and development centers and production sites in the country creating new jobs? Germany s image abroad is particularly important as the German economy relies heavily on exporting premium products. It also affects foreign (FDI) via the perceptions of global players and decision-makers. What does Germany represent today? Has its image changed as a result of the crisis? When it comes to competing with other business locations, can Germany remain in the major league in the eyes of international managers? These are the issues we will shed light on in this location study. #1 most attractive location for FDI in Europe 6th most attractive location for foreign investors 2nd most FDI projects in Europe 60% of investors believe that Germany has an attractive business location policy 7% increase in FDI projects vs. 42% increase in jobs created vs. 11% of FDI projects come from China and India 32% of all FDI projects by Chinese companies in Europe are implemented in Germany Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times? 1

4 The global perspective The most attractive countries in the world Germany is the sixth most attractive location for investment in 2012 The world's most atttractive countries 2012 China 44% (38%) India 21% (23%) US 19% (20%) Russia 19% (11%) Brazil 18% (16%) Germany 13% (12%) United Kingdom 6% (4%) Poland 6% (11%) Japan 6% (4%) Argentina 4% (n. a.) France 3% (3%) Source: Ernst & Young s European attractiveness survey Percentage of respondents mentioning the country. Up to three responses possible. Total respondents: 840. figures in brackets. As in previous years, China occupies first place in the ranking of countries, with the gap between it and its closest rival, India, increasing significantly from 15 to 23 percentage points. Russia and the United States share third place, Russia achieving this with an impressive rise of 8 percentage points, while the United States fell 1%. With 18% (previous year: 16%), Brazil continues to improve its position. As by far the highest-ranking European location, Germany has gained one percentage point to 13%, but has slipped from fifth to sixth place overall having been overtaken by Russia this year. The results are clear: the emerging countries remain the most popular locations for investment. In light of current developments in the global economy, this is hardly surprising. While not every country has yet emerged from the global economic crisis, the end of the recession for some has meant that many companies have moved out of crisis mode and switched firmly back to growth strategies. Business profits are increasing worldwide and many major groups have weathered the crisis in surprisingly good shape. Now the focus has primarily returned to the regions with the most promising opportunities for growth. China, which continues to have almost double-digit economic growth rates, still takes first place of course. 2 Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times?

5 The global perspective Europe's most attractive countries Germany France 25% United Kingdom 24% Poland 22% Russia 12% Czech Republic 12% Sweden 10% Spain 8% Italy 8% Norway 7% Netherlands 7% Romania 7% 56% Source: Ernst & Young s European attractiveness survey Percentage of respondents mentioning the country. Up to three responses possible. Total respondents: 840. Germany's main competitors: China and the US China US France Japan 5% n. a. Belgium 2% n. a. 13% United Kingdom 9% 8% Poland 3% 4% Italy 2% n. a. Netherlands 2% n. a. 10% 12% 16% 19% 25% 2012 Source: Ernst & Young s attractiveness survey Germany. Percentage of respondents mentioning the country. Total respondents: 201. The trend, which has been evident for some time, for BRIC countries to gain importance at the expense of the Western industrial nations, seems to be intensifying in the wake of the economic crisis and through the European debt crisis. Moreover, Europe is in danger of becoming a two-tier society comprising the relatively stable northern countries and the debtridden countries in the south of the continent in some of which economic development has been set back years. In this context, Germany appears to be a pillar of strength in troubled times, with the positive findings of the survey underscoring the country s special status in Europe. Germany emerged from the 2009 crisis far earlier than had been predicted or even considered possible. This was due to the considerable competitiveness of German companies, which were able to benefit in particular from strong growth and significantly increased demand in emerging markets. Having weathered the crisis, Germany is the only Western country to have positioned itself as a top global business location. The United Kingdom and France lie far behind Germany in the opinions of investors not just on this global ranking, but also on perceived favorability for development opportunities. When asked which European business locations will be the most attractive over the next three years, more than one-half of those polled (56%) cited Germany, with only a quarter naming France or the United Kingdom. However, Germany faces sustained pressure, particularly from the emerging economies. The managers polled named China (25%) and the United States (19%) as Germany s main competitors when it comes to winning foreign investment both also on an upward trend. By contrast, only 10% and 9% of respondents cited France and the United Kingdom respectively as major competitors to Germany. These results clearly show that Germany is major player in the world, not just in Europe. Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times? 3

6 A closer look Germany as a business location The foundations of Germany s attractiveness The Federal Government s handling of the effects of the crisis and the subsequent boom met with broad approval from the respondents: 60% praised the business location policy, with only 32% rating it negatively. In comparison with, the figures have worsened slightly: only 27% of responses were negative in the previous year. After years of economic and social reform, leading to greater competitiveness and a more flexible labor market, the German economy is extremely flexible and resilient. This is now being acknowledged abroad, setting Germany apart from many other European countries in the eyes of foreign investors. Investors satisfied of Germany's attractiveness in 2012 No 32% ( results: 27%) Definitely no 6 % 26 % Generally no No response 8 % Definitiely yes 21 % 39 % Generally yes Source: Ernst & Young s European attractiveness survey Germany. Total respondents: 201. Yes 60% ( results: 60%) 4 Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times?

7 A closer look Germany s strengths from the perspective of foreign companies Foreign investors rate the infrastructure in Germany more highly than anything else. Of those polled, 88% described Germany as an attractive business location in terms of its transport infrastructure, with 60% rating it as very attractive. The telecommunications infrastructure rated only slightly less positively and Germany also scored particularly well on workforce skill and social climate. Germany has slightly improved on all of these factors since. Germany has made a significant leap in the area of stability and transparency of the political, legal and regulatory environment. Its approval percentage on this factor, which is one of the three most important in the eyes of investors, has risen from 72% to 80%. The attractiveness of the internal market the most important criterion for a business location was also rated more positively than in (increasing from 72% to 77%). Germany as a business center: strengths Infrastructure: transport and logistics 60 % 28 % 88 % (85 %) Infrastructure: telecommunications 51 % 35 % 86 % (82 %) Workforce skill 53 % 32 % 85 % (82 %) Social climate 47 % 37 % 84 % (83 %) Stability and transparency of the political, legal and regulatory environment 44 % 36 % 80 % (72 %) Attractiveness of internal market 38 % 39 % 77 % (72 %) Potential for growth in productivity 37 % 36 % 73 % (61 %) Personnel/labor costs 8 % 41 % 49 % (34 %) Flexibility of labor law requirements 7 % 39 % 46 % (33 %) Business taxation 8 % 35 % 43 % (36 %) Very attractive Quite attractive Source: Ernst & Young s European attractiveness survey Germany. Percentage of respondents mentioning the country. Prior year figures in brackets. Total respondents: 201. A remarkable increase in satisfaction can also be seen in the area of personnel and labor costs. In the previous year, 34% of respondents gave Germany a good rating this figure is now 49%. The percentage of those who consider Germany to be less attractive or not at all attractive in this respect has simultaneously fallen from 55% to 41%. It remains to be seen whether, and if so how, the higher wage settlements expected for this year will affect the survey results in Even the number of people praising the flexibility of labor law requirements has increased significantly, with approval climbing from 33% to 46%, and negative ratings falling from 50% to 34%. In comparison with the previous year, Germany has achieved better attractiveness figures across the board. Most notable is the improvement in labor costs: in 2006, 78% of foreign decisionmakers saw this criterion as an obstacle to investment; since then, the figure has fallen to 41%. And with good reason: labor costs elsewhere have caught up significantly, particularly in eastern European countries, while only minimal increases have been seen in Germany. As a business location, Germany has significantly improved its competitiveness in recent years, especially in terms of unit labor costs compared with other major western European economies a development that has greatly contributed to the German economy s export success. The managers polled expect Germany s attractiveness as a business location to improve even further over the coming years: 50% anticipate some improvement, with only 12% predicting a (slight) deterioration. In contrast, the investors are less confident when it comes to Europe as a whole. Thirty-eight percent expect an improvement, while 22% predict that the situation will deteriorate. Investors expect further improvement in location attractiveness Germany Europe Worsen slightly 12 % 36 % Remain the same n/a 2 % Improve significantly 9 % 41 % Improve slightly Source: Ernst & Young s attractiveness survey Germany. Total respondents: % Remain the same n.a Worsen significantly 1 % 18 % 7 % Worsen slightly 4 % Improve significantly 31 % Improve slightly Source: Ernst & Young s European attractiveness survey Total respondents: 840. Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times? 5

8 A closer look Planned investments of foreign companies Germany s continued high rating as a business location should be reflected at least partially in companies plans concerning specific investments. 24% of the companies polled currently plan to invest in Germany. Planned investment by foreign investors in Germany n/a 6 % Yes 24 % Taking into account Germany s sustained strong appeal as a business location overall, it is not surprising that the number of businesses potentially leaving the country is relatively low. In 2008, 19% of companies had plans to relocate operations from Germany to other countries. This figure sank to 11% in 2009 and remained at this level until this year s slight increase to 14%. The survey results for the coming year should reveal whether this heralds a reversal of the trend, or whether it is simply due to statistical variations (in light of the relatively low number of respondents with operations in Germany). Most of the companies that had been considering relocating to a low-wage location for cost reasons made the move several years ago. While there will certainly be further relocations, the rate of relocation will fall, partly because costs in target countries primarily in central and eastern Europe have increased considerably, making relocating less attractive. 70 % No Planning to relocate out of Germany? Source: Ernst & Young s attractiveness survey Germany. Total respondents: 201. n/a 8 % Yes, definitely 5 % Yes, possibly 9 % Yes 14% ( results: 11%) No 78% ( results: 75%) 58 % Definitely not 20 % Probably not Source: Ernst & Young s attractiveness survey Germany. Total respondents: 201. Companies with business activities in Germany. 6 Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times?

9 The outlook for Germany as a business location One in three managers polled named the automotive industry in the top three drivers of growth, with the technology industry also expected to play a major role listed by 29% of respondents as a significant growth driver. The energy (21%) and environmental technology industries (20%) rank considerably lower than these top two fields in managers opinions. The financial industry, consumer goods manufacturing and the construction sector were cited comparatively rarely. Investor opinion: these industries have potential in Germany Transportation and automotive industry 33 % Information and communications technology, IT 29 % Energy/utilities 21 % Environmental technology 20 % Pharmaceutical industry and biotechnology 16 % B2B services (excluding finance) 13 % Banking/insurance 9 % Logistics and sales channels 9 % Consumer goods 6 % Real estate and construction 3 % Source: Ernst & Young s attractiveness survey Germany. Percentage of respondents who named the industry. Up to two responses possible. Total respondents: 201. Managers regard Germany s high-quality research and development, followed by its stable business environment and the quality of its workforce, as the country s most important competitive advantages. The present shortage of skilled employees could, however, become a major problem for Germany as a business location. Even though the current situation in which companies have difficulty finding suitable personnel is largely due to cyclical economic trends, it can still be assumed that the shortage of skilled employees will become increasingly severe in the medium and long term. Germany s future clearly depends on a strategy for innovation. In the respondents opinions, if Germany is to meet its aim of innovation leadership, it will have to improve basic and advanced training, especially in the field of new technologies, which will shape the economic world in the future to an even greater degree than at present. Investors see Germany's capacity for research and innovation as its USP Capacity for research and innovation 40 % Predictability of the business environment 35 % Variety and quality of the workforce 34 % Social responsibility of companies 22 % High purchasing power 19 % Green technology and services 18 % Source: Ernst & Young s attractiveness survey Germany. Percentage of respondents who named the characteristic. Up to two responses possible. Total respondents: 201. Investors identify room for improvement in basic and advanced training for new technologies Improving basic and advanced training in the field of new technologies 53 % Improving tax incentives for innovative companies 31 % Creating an environment which promotes innovation and creativity 24 % Developing joint research products on a European level 19 % Promoting entrepreneurial spirit 18 % Promoting venture capital and other financial resources 11 % Source: Ernst & Young s attractiveness survey Germany. Percentage of respondents who named the area. Up to two responses possible. Total respondents: 201. Those polled also see tax incentives for innovative companies as playing a major role. This aspect should not be underestimated: not only are corporate taxes in Germany relatively high, but the fact that there is no tax relief for investing in research and development unlike in almost every other major European country also proves especially detrimental. Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times? 7

10 Germany in The reality of foreign s Increasingly becoming a European FDI hot spot Despite the debt crisis and ailing economies, the number of foreign (FDI) projects in Europe rose by 4% to 3,906 in the past year, a new record level. The number of jobs created as part of these FDI projects also rose in by 14%, but still failed to match pre-2008 levels. Foreign in Europe: projects and jobs Number of new projects: avg % / year 3,712 3,721 3, ,303 3, % +5 % +0 % 11 % +14 % +4 % 3,906 As shown in a multiple-year comparison, the weaker growth in jobs created is primarily attributable to fewer major new investments being made in central and eastern European countries. Eastern Europe is moving closer to Western Europe in this respect, with investment projects tending to be smaller, the service sector gaining in importance and industry investments becoming less frequent Number of jobs created: avg % / year 215, , , , , , , % 18 % 15 % 16 % +10 % +15 % Source: Ernst & Young s European Investment Monitor. 8 Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times?

11 Germany in European coutries as locations for investment Rank Investment coutry Germany continuing to recover Market share Development 11 1 United Kingdom % 728-7% 2 Germany % % 3 France % 562-4% 4 Spain % % 5 Russia % % 6 Belgium % 159-4% 7 Netherlands % % 8 Poland % % 9 Ireland % 114-8% 10 Switzerland 99 3 % 90 9 % 11 Italy 80 2 % % 12 Turkey 97 2 % % 13 Sweden 81 2 % 77 5 % 14 Hungary 66 2 % 88-33% 15 Czech Republic 66 2 % 71-8% 16 Romania 71 2 % % 17 Serbia 67 2 % % 18 Slovakia 45 1 % 58-29% 19 Finland 62 2 % % 20 Denmark 52 1 % % Other % % Total 3,906 3,757 4 % Source: Ernst & Young s European Investment Monitor. In, as in previous years, most foreign was recorded in the United Kingdom. The number of new FDI projects in the United Kingdom, however, declined by 7%. The country s lead over Germany in second place dwindled to 82 down from 168 in and 260 in France, having regularly occupied second place behind the United Kingdom, slips to third place with the number of new investment projects declining by 4%. This means Germany is the only country in the top three where the number of new FDI projects rose. It now has a market share of 15%, compared with just 10% in The United Kingdom s performance in survey-based rankings of the most attractive investment locations is relatively weak compared with Germany s. So why does the United Kingdom regularly attract the most investment projects? The answer is relatively simple: the United Kingdom benefits greatly from its close ties (including a common language) with the United States by far the largest investor in Europe, and is therefore the target for a commensurately high proportion of investment projects by US firms. In concrete terms: 27% of all investment projects in Europe by US firms in the past year were in the United Kingdom, with only 12% in Germany. It is notable that while the number of US investment projects in the United Kingdom rose by 11% in, the total number of projects in the United Kingdom declined by 7%. The United Kingdom s relatively strong performance is largely due to US firms being very willing to invest. If investments by US firms are excluded from the analysis, the total number of investment projects for the United Kingdom was 397 in and 474 in a 16% decrease. For Germany the corresponding figures are 473 (in ) and 419 (in ) a 13% increase. In other words, the fact that Germany only occupies second place in this year s ranking is due to the United States major influence as an investor in Europe, and specifically the above-average commitment of American investors in the United Kingdom and their below-average commitment in Germany. Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times? 9

12 Germany in The table below details the top 10 European destinations of US FDI. AAs the largest investor in Europe, the United States has raised the number of investment projects in Europe by 6% year on year. US investors primarily target the United Kingdom, Germany, France and Ireland, which also benefits from a shared language. Of the 106 FDI projects recorded for Ireland, 68 came from the United States. For many years, China has been steadily increasing its influence as an investor in Europe. By the People s Republic occupied seventh place in the investor ranking, with the number of investment projects rising by 22% on the year to 140. A multiple-year comparison shows a clear positive trend for Germany as a business location. The number of investment projects has more than tripled since However, this may be partly due to the improved data basis. Similarly, the number of jobs created by foreign investors has also seen a marked increase, albeit subject to sharp fluctuations. Over the past year, a total of 17,276 jobs were created (42% up on the previous year) as part of the 597 projects recorded. The United Kingdom secured the most new jobs in Europe in, with more than 30,000 jobs created. Germany was well behind with more than 17,000 new jobs, followed by Serbia then France with more than 13,000 each. The clear rise in the United Kingdom s case despite the lower number of investment projects is attributable to an increased number of very large projects. The number of FDI projects that created more than 500 jobs rose from 6 in to 18 in. In Germany there were only four (in ) and six (in ) projects of this magnitude. Germany s second place in the job ranking compares favorably with its fourth and tenth placing, respectively, Where US companies invest Rank Ranking: the largest investors in Europe (number of projects) Rank Investment coutry Investment coutry Market share Market share Market share Market share Change 11 1 United Kingdom % % 11 % 2 Germany % % -12% 3 France % % 17 % 4 Ireland 68 7 % 76 8 % -11% 5 Netherlands 62 6 % 46 5 % 35 % 6 Spain 53 5 % 41 4 % 29 % 7 Switzerland 41 4 % 50 5 % -18% 8 Belgium 38 4 % 50 5 % -24% 9 Poland 24 2 % 33 3 % -27% 10 Russia 24 2 % 24 2 % 0 % Source: Ernst & Young s European Investment Monitor. Development 11 1 US 1, % % 6 % 2 Germany % % 6 % 3 United Kingdom % % 30 % 4 France % % 3 % 5 Switzerland % % 24 % 6 Japan % % 5 % 7 China % % 22 % 8 Netherlands % % -8% 9 Italy 95 2 % 99 3 % -4% 10 Sweden 95 2 % 99 3 % -4% Source: Ernst & Young s European Investment Monitor. 10 Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times?

13 in the previous two years. France falls from second to fourth place, and the EU candidate Serbia climbs from sixth to third place. One notable development is that, despite the economic crisis, Spain was able not only to attract more projects (up 38%), but also to considerably increase the number of jobs created in the process by 19% to 9,200. Impressive increases were seen in a number of other countries including Turkey, Macedonia and the Netherlands, with significant decreases in Poland, Hungary and Slovenia among others. Foreign in Germany Number of new projects: avg. +23 % / year % +7 % +28 % +7 % +34 % +7 % Number of jobs created: avg. +33 % / year % 40 % +92 % 57 % +144 % +42 % Source: Ernst & Young s European Investment Monitor. Jobs created by foreign Rank Country Number of jobs created Market share Number of jobs created Change 11 1 United Kingdom 29,888 19% 21,209 41% 2 Germany 17,276 11% 12,044 42% 3 Serbia 13,479 9% 8,519 58% 4 France 13,164 8% 14,922-12% 5 Spain 9,205 6% 7,723 19% 6 Russia 8,362 5% 8,058 4% 7 Poland 7,838 5% 12,366-37% 8 Turkey 7,295 5% 3,830 90% 9 Romania 5,985 4% 4,789 25% 10 Ireland 5,373 3% 5,785-7% 11 Hungary 5,237 3% 8,572-39% 12 Czech Republic 5,168 3% 4,815 7% 13 Slovakia 4,007 2% 6,271-36% 14 Belgium 3,599 2% 4,010-10% 15 Macedonia 3,040 2% % 16 Bulgaria 2,673 2% 2,935-9% 17 Netherlands 2,229 1% % 18 Austria 2,094 1% % 19 Sweden 1,960 1% 1,125 74% 20 Switzerland 1,546 1% % Other 8,406 4% 7,758 8% Total 157, ,357 15% Source: Ernst & Young s European Investment Monitor. Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times? 11

14 Germany in Who invests in Germany The great importance of the United States as an investor has already been mentioned one in four FDI projects in Europe comes from US investors. The United States is also by far the largest investor in Germany, yet its 21% share of the German market is below its average market share in European countries. Swiss companies, however, favored Germany as an investment destination and are the second-largest investor group in Germany. The large number of investment projects by Chinese companies is also noteworthy, with 45 projects by Chinese investors recorded in Germany in, more than in any other European country and 36% more than in the previous year. One in three investment projects run by Chinese companies in Europe were implemented in Germany. The United Kingdom only attracted half as many FDI projects from China, and France only a third. Who invests in Germany Rank Investment coutry Market share Market share Development 11 1 US % % -12% 2 Switzerland % 40 7 % 60 % 3 United Kingdom 54 9 % 45 8 % 20 % 4 China 45 8 % 33 6 % 36 % 5 France 38 6 % 32 6 % 19 % 6 Netherlands 38 6 % 31 6 % 23 % 7 Japan 25 4 % 25 4 % 0 % 8 Austria 24 4 % 17 3 % 41 % 9 Sweden 19 3 % 9 2 % 111 % 10 India 16 3 % 11 2 % 45 % Source: Ernst & Young s European Investment Monitor. Where Chinese companies invest Rank Investment coutry Market share Market share Development 11 1 Germany % % 36 % 2 United Kingdom % % -27% 3 France % % -22% 4 Belgium 8 6 % 6 5 % 33 % 5 Spain 8 6 % 4 3 % 100 % 6 Italy 3 2 % 7 6 % -57% 7 Sweden 6 4 % 3 3 % 100 % 8 Netherlands 5 4 % 3 3 % 67 % 9 Switzerland 3 2 % 3 3 % 0 % 10 Russia 3 2 % 3 3 % 0 % Source: Ernst & Young s European Investment Monitor. 12 Ernst & Young's 2012 German attractiveness survey A pillar of strength in troubled times?

15 Methodology The Ernst & Young 2012 Germany attractiveness survey is based on a dual methodology that reflects: 1 Foreign investors perceptions of, and forecasts for, Europe and Germany 2 The attractiveness of Europe and Germany to foreign investors These are represented by our survey, which recorded the views and opinions of 840 international decision-makers about the appeal of Europe. These managers representing all countries, industries and business models were interviewed during February and March 2012 by an independent market research organization. Broken down into five main industry categories, the companies surveyed represent all of the major European and global economic sectors. To ensure a representative geographical cross-section, as well as of the various corporate structures, sizes and activity types, the survey included the opinions of: small, medium-sized and multinational companies and industrial and service sector companies In a separate survey, 201 decision-makers from companies outside Germany were asked to give their appraisal of Germany as a business location. Profile of companies surveyed Geography North America 35 % Western Europe 34 % Asia 19 % CEE 6 % Northern Europe 5 % Oceania 1 % Size Less than 150 million 39 % From 150 million to 1.5 billion 41 % More than 1.5 billion 20 % This is represented by the actual level of foreign as reported in Ernst & Young s European Investment Monitor (EIM). This source monitors foreign projects involving the creation of new operating facilities and new jobs. By excluding portfolio investments, mergers and acquisitions, it shows the actual, physical investments in manufacturing or services by foreign companies throughout Europe. Ernst & Young International Location Advisory Services (ILAS) ILAS is part of Real Estate Advisory Services (REAS). Ernst & Young REAS operates in the field of transaction support, strategic real estate advice and project finance. Our service portfolio consists, among other things, of real estate portfolio optimizations, due diligence research, valuations, risk analysis and management, feasibility studies and public-private partnership projects. Additionally, Ernst & Young REAS (more specifically ILAS) supports companies globally with their strategic international investment and relocation decisions. ILAS also supports investment promotion and Contacts development agencies in their targeting, acquisition and after-care strategy and policy formulation aimed at maximizing the volume and quality of investments. Companies are increasingly considering new location and cross-border investment strategies and more and more countries welcome foreign investors. These new options require a sharpened focus on the balance of risks and rewards in economies and industries globally. Today, more than ever, companies look at a complex variety of costs, quality and risk factors before selecting their strategic business locations. The question of where do we (re)locate is increasingly becoming an important part of a company s overall strategy. Ernst & Young ILAS knows why, how and when. Ernst & Young ILAS offers solutions for clients who have questions related to their location strategy, plant and office locations, real estate investments and divestments. After an analysis of an investment project s specific needs, our teams work with the client s management on the best long-term options in terms of cost savings, appropriate labor pools, credible service providers, and secure infrastructure. Michael Janetschek Partner/ Ernst & Young Real Estate GmbH Tel.: Michael.janetschek@de.ey.com Caroline Rodenburg Senior Manager / International Location Advisory Services Tel.: caroline.rodenburg@nl.ey.com

16 Ernst & Young Assurance Tax Transactions Advisory About Ernst & Young Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 152,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit EYGM Limited. All Rights Reserved. EYG No. In line with Ernst & Young s commitment to minimize its impact on the environment, this document has been printed on paper with a high recycled content. Contact Peter Englisch Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft Wittekindstr. 1a Essen Tel.: peter.englisch@de.ey.com This publication contains information in summary form and is therefore intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM Limited nor any other member of the global Ernst & Young organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication. On any specific matter, reference should be made to the appropriate advisor. EMEIA MAS E ED None Growing Beyond In these challenging economic times, opportunities still exist for growth. In Growing Beyond, we re exploring how companies can best exploit these opportunities by expanding into new markets, finding new ways to innovate and taking new approaches to talent. You ll gain practical insights into what you need to do to grow. Join the debate at