A commentary by our author Klaus Bastian:
“We haven’t seen a crisis like this since the founding of the Federal Republic,” warns Oliver Zander, Director General of the employers’ association Gesamtmetall. The German metal industry is fighting for its economic survival, even as the federal government announces further reforms. According to the association, more than 1,000 companies are at risk of closure. At the same time, 42 percent of firms are planning further workforce reductions. Up to 300,000 additional jobs could disappear in the coming years. High energy prices, labor costs, and bureaucracy are increasingly driving production abroad. Despite political promises of relief, there is, as yet, no sign of any fundamental improvement in the conditions for doing business in Germany.
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The metal industry is sounding the alarm – the federal government should finally act
The warnings from the industry have now reached a historic dimension. In a survey of 1,461 companies, 39 percent rated their economic situation as bad. Another 40 percent consider their situation to be merely satisfactory. Only 15 percent expect an improvement within the next six months. At the same time, 85 percent expect a standstill or further deterioration. According to Gesamtmetall, more than 10,000 companies will have to downsize their business activities.
The discrepancy between political reform announcements and economic reality is particularly serious. The federal government has decided to provide individual relief for energy prices, taxes and bureaucracy. But the industry continues to report significant locational disadvantages and falling investments. For many companies, gradual relief is not coming quickly enough. Total metal therefore calls for comprehensive reforms instead of further individual measures. The crucial question is no longer what relief will be announced, but when it will actually improve the economic situation of companies.
Despite government promises, new orders are heading abroad
The trend regarding new industrial orders is particularly alarming. For nearly two-thirds of the companies surveyed, an influx of new orders does not translate into a full increase in domestic production. Instead, firms are shifting a significant portion of their manufacturing to existing facilities abroad. More than half of the companies with overseas plants now consider production at those locations to be more cost-effective. Consequently, Germany is losing industrial value creation and employment, even as order volumes rise.
This development runs counter to the political objective of making Germany a more attractive industrial base. While the federal government promotes investment initiatives and structural reforms, the Association of German Chambers of Industry and Commerce (DIHK) reports that private investment in the first half of 2026 remains 11 percent below pre-pandemic levels. Among industrial firms that invest abroad, 41 percent cite cost savings as their primary motivation. In doing so, companies are responding to local business conditions that they increasingly perceive as disadvantageous in an international comparison.
Hundreds of thousands of jobs lost – with more losses on the horizon
The consequences are already visible in the labor market. According to calculations by the German Economic Institute (IW), approximately 420,000 industrial jobs have been lost since 2019. In the manufacturing sector alone, 144,100 positions were shed in the twelve months leading up to the end of June 2026—42,300 of which were in the automotive industry. Major suppliers such as Bosch and ZF have also announced further, large-scale workforce reductions. At the same time, these job cuts are increasingly affecting smaller companies throughout industrial supply chains.
Even more concerning is the long-term trend: since 2018, output in the metalworking and electrical industries has fallen by approximately 15 percent, while employment has declined by only 8 percent. Gesamtmetall therefore fears an additional loss of approximately 300,000 jobs. Even higher defense spending is unlikely to offset these job losses. A study by EY-Parthenon and Dekabank estimates that increased NATO-related spending could generate around 144,000 new jobs by 2029.
High energy costs remain a competitive disadvantage, despite government relief measures
The root causes of the crisis have been known for years. According to Gesamtmetall, labor costs in Germany amount to roughly 55 euros per hour. Compounding this are high energy prices, rising social security contributions, and extensive regulatory requirements. While the federal government has introduced relief measures—such as reductions in electricity grid fees and the electricity tax, as well as a special electricity price for industry—the associations argue that these steps are insufficient to compensate for Germany’s competitive disadvantages.
The Association of German Chambers of Commerce and Industry (DIHK) continues to highlight significant issues regarding energy prices and investment conditions. According to the “Energy Transition Barometer” (Energiewendebarometer), around 40 percent of industrial firms are considering scaling back or relocating their German production operations due to high energy costs. This suggests that current government support measures are failing to achieve the necessary, broad-based impact. Small and medium-sized enterprises (SMEs), in particular, cannot simply relocate their production sites; they are effectively forced to either shoulder permanently higher costs or scale down their business activities.
Gesamtmetall calls for reforms—relief measures are not reaching businesses effectively
The demands directed at the federal government are specific. Gesamtmetall is calling for lower taxes, reduced bureaucracy, competitive energy prices, and a cap on social security contributions. Furthermore, the association advocates for a greater share of non-insurance-related benefits to be financed through general tax revenue—a proposal supported jointly by both employers and the trade union IG Metall. Gesamtmetall Chief Executive Zander has leveled particular criticism at the fiscal policy pursued by Finance Minister Lars Klingbeil. He is calling for substantial cost-cutting measures to avoid placing additional burdens on companies.
Although policymakers have adopted reform programs and announced further relief measures, the latest industry figures show no signs of a lasting stabilization. According to Gesamtmetall, the metal industry is heading toward its third consecutive year of recession. Furthermore, the association’s calculations indicate that, since 2020, there has been a shortfall of approximately 65 billion euros in investments for machinery and equipment compared to the previous growth trend. This investment gap cannot be closed by political declarations of intent; rather, companies need to have sound economic reasons once again to build new production capacities in Germany.
Political announcements cannot bring back lost industrial operations
This trend now threatens entire industrial value chains. When major manufacturers relocate their production abroad, German suppliers lose orders and investment prospects. Consequently, employment, training opportunities, and local tax revenues decline. A particularly problematic aspect is that these consequences often only become apparent years after the initial investment decisions were made. Once plants have closed, they cannot simply be replaced in the short term by new subsidy programs.
The federal government points to relief measures already enacted and further planned reforms. From the industry’s perspective, however, core problems remain unresolved. Organizations such as Gesamtmetall and the DIHK (Association of German Chambers of Commerce and Industry) are therefore calling for faster and more comprehensive improvements to the conditions for doing business in Germany. The data provide a clear economic justification for this: production and employment are shrinking, while companies are increasingly investing abroad. Without a tangible improvement in competitiveness, further political announcements are unlikely to prevent industrial value creation from leaving Germany for good.
Author: Klaus Bastian – Blackout News
Sources: Gesamtmetall (23.10.26) – Handelsblatt (23.10.26) – Onvista )23.10.26) – DIHK (20.10.26) – IHK BW (20.10.26)