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Volker Leinweber
Economics and Foreign Trade
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Metal and Electrical Industry (M+E) Economic Survey for Bavaria – Winter 2024
The economic situation in the Bavarian metalworking and electrical industry remains bleak, with no prospect of improvement. These are the findings of our latest economic survey, which covered 213 of the bayme vbm member companies with a total of 227,000 employees. bayme vbm is the employers’ organization for the Metalworking and Electrical Industries (M+E) in Bavaria.
Current business situation and expectations
According to Bavarian M+E companies, the domestic business situation has remained poor. At -29.4 percentage points, the balance of positive and negative ratings was almost as low as in the summer. The assessment of foreign business fell from -10.9 to -28.2 points and was thus at a similarly low level as for domestic business.
At -13.6 percentage points, the balance of expectations for domestic business is clearly in negative territory and is even slightly lower than six months ago. In terms of export trade, positive and negative expectations balance each other out, meaning that companies expect foreign business to remain weak.
Production and Investment plans
Domestic production and investment plans have further declined and slipped even deeper into negative territory. Moreover, only 15 percent of the few investments are planned for expansion measures, which is barely more than the all-time low of 12.3 percent in the summer of 2024.
The gap in favor of foreign countries is widening. At their sites abroad, companies’ production and investment plans are positive and have risen further compared to the July survey.
Earnings situation
As was already the case in the summer survey, some 41 percent of companies find themselves in a critical situation, i.e.they expect a net return on sales of no more than two percent. A noticeable deterioration has even been observed within this group. In July, 13 percent of companies were expecting losses; this figure has now risen to 20 percent. A good eight percent expect to break even while about 13 percent anticipate a return on sales between one and two percent.
On the other hand, over 42 percent of companies are hoping for a net return on sales of four percent or more. This proportion has not changed since summer.
Employment plans
Having fallen significantly in the summer survey, employment plans remained at this low level in the current survey. Nine percent of companies are expecting to create additional jobs in Germany, while 41 percent fear they will have to cut jobs. The employment plans of Bavarian M+E companies at sites abroad have also fallen, although the balance is still clearly positive at +11.8 points.
In view of the deteriorating situation on the domestic labor market, the shortage of labor and skilled workers is easing, but remains a structural problem. Almost eleven percent of enterprises stated that their production or business activities were "significantly" impeded by a lack of workers, while a further 45 percent of companies see their business activities "slightly" hampered.
Worsening business location conditions
In total, 70 percent of the M+E companies surveyed said that location factors in Germany have worsened over the last 24 months. The causes are manifold. Bureaucracy, labor costs and energy costs were the most frequently cited.
The deterioration in framework conditions poses an increasing risk for Bavaria as an industrial location. A good 21 percent of the companies that saw a worsening in business location conditions have already relocated parts of their value chain to other countries over the last twelve months, and more than 43 percent are planning to do so. Almost three quarters of companies stated that the worsening location conditions are having a negative impact on their investment activities in Germany.