Germany's $197 billion energy aid package will provide limited relief for businesses and is unlikely to dissuade companies that are already looking to relocate to cheaper manufacturing bases overseas
The German government set out its energy relief package last month, including a gas price brake and a cut in sales tax for the fuel to help households and small and medium-sized business cope with surging prices.
High labour and other costs in Germany have been driving many companies to relocate parts or all of their business to cheaper locations in emerging European economies and elsewhere or to think about doing so. As manufacturers in Germany face energy bills of up to 10 times more than what they paid two years ago, one in five engineering firms saw the risk of relocating at least some of their business overseas, a survey by German union IG Metall showed last month.
"It will help, but we don't yet know exactly what to expect," said Wuelfing Managing Director Johannes Dowe. A study by Deutsche Bank saw production in Germany shrinking by 2.5% this year and by 5% in 2023 due to rising energy prices.
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