German firms keen to relocate to CEE in 2025 – KPMG report finds

German companies are considering ramping up investments in Central and Eastern Europe (CEE), with 55% expecting the region’s economic significance to grow in the next 5 years, according to the “German CEE Business Outlook 2025” report by auditor KPMG.

The survey analysed the economic prospects and business strategies of German firms in 20 CEE countries, aiming to provide critical insights into investment trends, challenges and future opportunities in the region.

Nearly half of German firms plan CEE investment in 2025

Some 42% of companies surveyed plan to invest in CEE this year, 17% to the tune of over EUR 5mn, and 56% by 2030. Moreover, 22% are considering moving production from Germany to CEE, 19% in the next 12 months. However, only 3% have already made the decision.

Andreas Glunz, Managing Partner International Business at KPMG Germany said “the well-known weaknesses of Germany as a business location are causing companies in this country to relocate their production abroad.

“CEE is a preferred location: the German economy is already heavily invested there, is familiar with the area,” he said, adding that “given the growing importance of resilient supply chains, the region presents an attractive opportunity for German companies to optimise sourcing strategies while maintaining proximity to home markets.”

KPMG lists CEE’s top five countries for investment

Poland, Romania and Ukraine are the three top target countries for German investors in the short and medium term. As CEE’s largest economy, Poland remained the top prospective investment destination, with 51% of firms planning to invest there in the next five years. Romania follows with 43%, while Ukraine ranked third, despite ongoing security concerns, attracting 41% of respondents.

Ukraine’s potential as a future energy hub and IT outsourcing centre was particularly appealing to respondents, with 18% willing to invest, contingent on a peace agreement in the wartorn country.

CEE Desk head at KPMG Germany Nicolai Kiskalt said “Ukraine has the potential to become a new energy hub for the European Union, an alternative production location and to play an important role for European companies in the areas of IT and outsourcing.”

Hungary and Czechia were respectively the fourth and fifth most popular destinations for companies looking to invest, according to KPMG. Czechia also recorded the highest rise in future investment interest, from 23% in 2025 to 31% by 2030.

Key investment drivers, challenges

The top three reasons for investment in CEE are strong local demand (40%), availability of skilled labour (37%), and lower labour costs (33%). However, challenges persist, with 67% of firms citing political instability and security concerns as primary risks, followed by corruption (38%) and bureaucracy (31%).

Nearly half (45%) of companies rate the current business climate in CEE positively, with 36% describing it as “good” and 9% as “very good.” Over the next five years, optimism rises further, with 80% expecting the business environment to improve.

GEBA calls for deepening of internal market

The survey, conducted by KPMG with the German Eastern Business Association (GEBA), questioned 133 German firms active in CEE between November 20 and the end of 2024. It classified as CEE Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czechia, Estonia, Georgia, Hungary, Kosovo, Latvia, Lithuania, Moldova, Montenegro, North Macedonia, Poland, Romania, Serbia, Slovakia, Slovenia and Ukraine.

The GEBA represents businesses in 29 countries across CEE. Managing Director Michael Harms backed deeper EU integration in CEE to enhance market accessibility. “The region is a realm of opportunity in which the business possibilities outweigh the challenges that still exist,” he said.

“We would therefore like to see progress finally made in deepening the internal market and further EU integration in eastern and south-eastern Europe to make this region even more accessible,” Harms added.