The export-oriented German mechanical and plant engineering sector, hampered for almost two years by wars and trade conflicts, is sounding the alarm. "The backlog of reforms at home, numerous bureaucratic obstacles, geopolitical crises, rising trade barriers, and a global sense of customer uncertainty all combine to prevent the mechanical and plant engineering industry from emerging from its economic slump," said Bertram Kawlath, President of the industry association VDMA, on Tuesday. He therefore called on the German government to implement "genuine, far-reaching reforms at Germany's industrial base" to prevent "more and more research, production, and thus innovation from taking place abroad."
Corporate taxes need to be reduced more quickly than planned, weekly working hours must be made more flexible, and the retirement age should be gradually increased. Additionally, the introduction of new bureaucratic hurdles must come to an end. "Bureaucracy hangs around companies' necks like a millstone. It ties up time and money that would be better invested in research," Kawlath said.
Looking at economic prospects, Kawlath offered little hope. For 2026, the VDMA continues to forecast a production increase of just one percent, following an expected decline of five percent this year. "But at this level, growth would have to be significantly higher to speak of genuine growth momentum," Kawlath said.
SLUMP LEAVES MARK ON LABOR MARKET
The sluggish economic climate in the sector, which employs one million people and is a backbone of the German economy, is also leaving an imprint on the workforce. The latest figures for short-time work from August showed a 27 percent increase to 41,000 people. In addition, employment in the sector has dropped by 2.4 percent compared to the previous year, Kawlath explained. Demographic change, meaning the growing number of people retiring, also plays a role. The search for skilled workers therefore continues. "But it remains difficult. We hope we can retain the one million employees in the sector."
The medium-sized industrial sector has been under pressure for some time not only due to weak investment but also because of the impact of U.S. tariffs. "The punitive tariffs imposed by the Americans on steel and aluminum, which will soon likely affect around 56 percent of our machinery exports to the U.S., are poison for both trading partners. They must be quickly negotiated away," Kawlath demanded. According to a VDMA survey of nearly 400 member companies, almost half reported a decline in orders from the U.S. since April this year. Two-thirds expected revenue losses as a result of the tariffs, and almost half anticipated revenue declines of more than ten percent.
(Reporting by Anneli Palmen, edited by Ralf Banser. For questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)
