Bavaria's location quality: decline in factors and high loyalty of companies

Bavaria's location quality: decline in factors and high loyalty of companies

Things are getting critical in Bavaria! A current survey by IW Consult shows that the general quality of the business location will decline in 2025 compared to the previous year. The location quality only achieved 72.5 points out of 100, compared to 72.8 points in the previous year. This result comes from an annual survey that has been recording companies' views on the attractiveness of locations in Bavaria since 2013. Each of the five subject areas assessed – “Human Capital”, “General Infrastructure”, “Innovation Environment”, “Energy and Raw Materials”, and “State Administrative Action” – has lost quality.

Particularly alarming: For the first time in the history of this survey, no subject area received a grade better than 3.0. Administrative actions in particular received the worst rating with 4.2. In addition, all five subject areas have since lost an entire grade, with the exception of the innovation environment, which has only slipped by half a grade. Despite these declines, companies' loyalty to the location remains high: 91.1 percent of those surveyed would settle in Bavaria again.

Administrative actions and bureaucracy

Companies are dissatisfied with the existing bureaucratic hurdles. This is seen as a central factor for the reduced attractiveness of the location. According to a statement by Bavaria's Economics and Energy Minister Hubert Aiwanger, there is a clear need for action on the central location factors. This not only includes reducing bureaucracy, but also high energy prices and the shortage of skilled workers. Aiwanger emphasizes the importance of federal policy measures to support Bavarian companies.

Currently, 92 percent of companies have a connection to their homeland, which shows how important Bavaria is for many companies. However, the high cost structure and slow processes have met with a lot of criticism both in Germany and in the EU. The minister calls for a strengthening of competitiveness without additional requirements and also calls for fair relief in electricity costs and a simplification of bureaucracy.

Outlook for the future

For the coming years, it is necessary that the Bavarian economy receives more support from politicians. Aiwanger calls, among other things, for a reduction in electricity tax to the European minimum and an unbureaucratic commercial electricity price. Bavaria has already initiated measures such as a transformation fund with 100 million euros for the automotive industry and 750 million euros for start-ups to draw attention to the industry and promote growth.

Despite all the challenges, business hopes that the state's own strategies to improve location quality will be implemented promptly. The friendly treatment of entrepreneurs and the creation of a stable economic environment could help ensure that Bavaria remains a sought-after location.

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Read more about Bavarian location factors and economic perspectives here and discover delicious chicken recipes for every occasion here. You can find further insights into Bavaria as a business location here.