Declining production and job cuts: the slump in the German electrical and digital industry will continue in 2025. "Entrepreneurs need confidence. Turning the mood around is the most important task of the new federal government," warns Gunther Kegel, President of the industry association ZVEI.

Price-adjusted production slumped by over 9% from January to November 2024 inclusive. This is once again below the fall forecast of minus 7%. In terms of nominal revenue (including services), the German electrical and digital industry recorded a drop of 6.5% in the same period. Extrapolated to 2024 as a whole, this results in turnover of around 223 billion euros - compared to 238 billion euros in the previous year.

The sector cannot escape the industrial downturn. In the period from January to November 2024, production fell by 9.3% compared to the previous year and incoming orders by 8.5%.

The Association of the Electrical and Digital Industry expects the price-adjusted production of electrical and electronic goods "Made in Germany" to fall by 2% in the current year. This means that the slump would at least not be quite as deep as last year. However, Kegel cautions: "At the moment, we do not yet see a trend reversal, at best the first signs of hope."

Many companies have not yet taken the necessary steps to reduce their workforce. "This will certainly change now with the gloomy outlook for 2025," says the ZVEI President. "The industry is now catching up on what was postponed a little in 2024 due to the principle of hope."

Nevertheless, he is hoping for largely stable employment figures with a drop of one or 2% at most. "Whether this proves to be the case depends very much on political events in the coming weeks and months," says Kegel.

Too many regulations, too high taxes

Global production is growing more dynamically than German production. © ZVEI

In the view of the ZVEI, political regulation has gotten out of hand. 13,000 new EU regulations in the past five years - while just 3,000 have been added in the USA. According to the German Regulatory Control Council, the cost of bureaucracy for the German economy is over 65 billion euros a year - money that is lacking for investments and therefore new value creation.

Kegel, who manages the Mannheim-based sensor manufacturer Pepperl+Fuchs, emphasizes: "Germany as an industrial location is over-regulated and too expensive. It hinders entrepreneurial initiative and has lost its international competitiveness." For the past 15 years, global production has been growing more dynamically than local production, and Germany is threatened with "devaluation".

Germany's share of global production is falling. © ZVEI

Too much bureaucracy is slowing down innovation in Germany and the corporate tax burden must be "reduced to an internationally competitive level", the ZVEI demands. Electricity prices are also too high: the electricity tax must be reduced to the European minimum rate for all consumer groups - private households, trade, commerce and services.

Hoping for the new federal government

The ZVEI President draws confidence from the three megatrends of electrification, digitalization and automation, which are still fully intact and could develop new economic momentum. "Technologically, we are prepared for the efficiency turnaround and the climate-neutral transformation of our industrial society," says Kegel. "To achieve this, however, we must reconcile competitiveness and climate protection better than before."

For 2025, the ZVEI assumes that real production will continue to fall slightly by minus 2%. "To avoid another year of recession, the next German government must take urgent action," warns ZVEI President Kegel. "We need a turnaround in efficiency - not only in terms of technology, but also in terms of policy and regulation: less bureaucracy, more freedom for entrepreneurship, more room for innovation." The new federal government must ensure new confidence in Germany "from day one".