German chemical firms shift R&D abroad as costs, red tape bite
A VCI survey finds German chemical and pharma firms cutting domestic R&D and boosting investment abroad, citing government cost measures and bureaucracy.
Germany's chemical and pharmaceutical industries are rebalancing their research priorities, with a growing number of companies planning to reduce domestic R&D spending while increasing investment in foreign markets, according to a new industry survey.
The survey, released by the German chemical industry association VCI, found that nearly a third (29%) of companies intend to cut research and development expenditure within Germany this year. In contrast, only about 20% expect to increase their domestic R&D budgets.
The shift is even more pronounced for overseas operations. Roughly 40% of surveyed firms plan to raise R&D spending abroad — a figure four times higher than the share of companies planning cuts in foreign research investment.
While total industry R&D spending remained close to €16 billion ($18.7 billion) in 2025, VCI noted that growth has slowed. The association pointed to a healthcare cost-cutting package announced by Chancellor Friedrich Merz in July as a factor weighing on the pharmaceutical sector.
Longer-term trends also show Germany losing ground in innovation. VCI said Germany's share of global patents has nearly halved since 2010, falling to 7.6% in 2024, while China's share has almost quadrupled over the same period.
VCI, Europe's largest chemical industry trade group, represents around 2,000 companies.