An analysis by the auditing and consulting firm EY, reported by the German Press Agency, found that foreign investors announced 548 new projects in Germany in 2025. That was 10 percent fewer than the year before.

Henrik Ahlers, the head of EY in Germany, said the figures were a "warning sign for Germany as a business location. Germany is falling behind, and other European locations are developing significantly better."

He said Germany has talked for years about the need for reform, but has done too little, while other countries have made government services more digital, simplified their tax systems, and made it easier for companies to do business.

"In Germany, high taxes, high labor costs, expensive energy, and at the same time, paralyzing bureaucracy are stifling investment," Ahlers noted.

"Germany's inability to reform has now become known worldwide. Unfortunately, little remains of its image as a strong, high-quality location and an economic rock in turbulent times," he added.

The fall in investment comes at a difficult time for the German economy. Last month, the Halle Institute for Economic Research said company bankruptcies in Germany had reached their highest level since 2005.

The institute recorded 4,573 bankruptcies among partnerships and corporations in the first three months of the year. That was higher than the level seen during the 2009 financial crisis.

The last time the figure was higher was in the third quarter of 2005, when 4,771 bankruptcies were recorded.

The rise was especially sharp in March, when bankruptcies were 71 percent above the average for the same month between 2016 and 2019.

Germany's industrial sector is also under pressure. A Reuters report last August said 245,500 industrial jobs had been lost in Germany since 2019, before the coronavirus crisis.

Volkswagen has become one of the clearest examples of the problems facing German industry. The carmaker plans to cut around 50,000 jobs in Germany by 2030 after reporting a sharp fall in profits.

Its net profit fell 44 percent in 2025 to €6.9 billion, the lowest level since the fallout from the emissions scandal. Revenue was almost unchanged at just under €322 billion, while global deliveries slipped slightly to just under 9 million vehicles.

Volkswagen blamed the fall in profit on problems at Porsche AG, U.S. import tariffs, and the cost of restructuring the business. Porsche's operating profit fell from more than €5 billion to just €90 million in a year.