Location Outlook

Second Act Amending the Federal Requirements Plan Act

Reform of the Working Hours Act – Transition to a Weekly Maximum Working Time

Budget Act 2027 and Federal Financial Plan 2026 to 2030

Federal Building Code (BauGB) Amendment 2026

Industrial electricity in new contracts stands at around 16.7 ct/kWh in 2026, thus slightly below the previous year; relief through the grid fee subsidy (~€6.5bn) and the reduction of the electricity tax toward the EU minimum have a dampening effect. In international comparison (US, France) the level remains high and a structural competitive disadvantage, which grid expansion costs and reserve power plants may raise again going forward. Direction: improvement from a high starting level, but still burdensome.

The pension level guarantee of 48 percent until 2031, expanded mothers' pension, and active pension permanently increase expenditure and the federal subsidy; contribution rates for pension and health insurance are rising demographically toward 20 and over 17 percent, respectively. The minimum wage rises in stages to around €14.60 (2027). The SVR and Bundesbank point to growing non-wage labor costs and a shrinking labor force potential as a burden on employment and the location.

The reform of the debt brake (defense above 1 percent of GDP financed by credit) and the €500bn special fund support investment in the short term, but noticeably raise the debt ratio over the coming years (toward well above 65 percent). Rising interest and defense expenditure as well as structural deficits narrow the room for maneuver. Sustainability remains achievable but requires prioritizing consumptive spending.

The investment booster (declining-balance depreciation of 30 percent 2025–2027) and the gradual reduction of corporate income tax from 2028 are intended to bring the overall statutory burden of around 30 percent toward 25 percent and increase the attractiveness for investment. The ifo and IW assess this as an overdue approximation to the OECD average. The effect depends on counter-financing and sustained continuation beyond the legislative term.

The Skilled Immigration Act and the Opportunity Card aim at net immigration on the order of several hundred thousand annually, which the labor market needs given the demographics. At the same time, border controls and suspended family reunification exacerbate irregular migration. Economically decisive is labor market integration; the net picture remains slightly positive but implementation-dependent.

A new digital ministry, bureaucracy reduction acts, and a digitalization agenda are intended to accelerate procedures and reduce compliance costs; the relief potential is estimated at several billion euros. Historically, implementation remains sluggish (register modernization, approval times), which is why the structural efficiency gain is uncertain. Direction slightly positive with low confidence.

The EU omnibus initiatives for simplification as well as the planned replacement of the national supply chain act by the softened EU directive reduce reporting and compliance burdens for companies. Accelerated planning and approval procedures provide additional relief. The deregulation path has been embarked upon, but its extent depends on EU negotiations and national implementation.