Bavaria slips to 10th in international location ranking as costs and weak dynamism bite

Ranking decline

Bavaria has fallen to 10th place in an international business-location ranking compiled by IW-Consult on behalf of the Vereinigung der Bayerischen Wirtschaft (vbw). The ranking compares the Freistaat with 45 other countries. A year earlier Bavaria held 9th place, and before that it typically occupied 2nd or 3rd. Methodology and weighting changes between 2024 and 2025 limit comparability somewhat, but the downward trajectory is clear. Germany as a whole fares worse, landing in 13th place.

Top performers and close rivals

The top four positions go to Switzerland, Canada, Denmark and the USA. Just ahead of Bavaria, Finland sits in 8th and New Zealand in 9th, both with only a minimal lead. Bavaria's 10th-place finish keeps it ahead of Germany overall but narrows the gap to the lower mid-field.

Cost pressure and deindustrialization

vbw chief executive Bertram Brossardt described Bavaria as still a strong global industrial location, but warned that the advantage over competitors is shrinking. He pointed to comparatively high costs as the decisive factor.

Bei Steuern, Arbeitskosten und Energiekosten muss dringend nachgesteuert werden.

Brossardt said Bavaria has been losing competitiveness for several years and is experiencing creeping deindustrialization as a consequence.

Dynamism ranked near the bottom

Bavaria's performance on dynamism, a measure of future trajectory, is far worse than its current location quality. The Freistaat ranks 42nd out of 45, placing it among the last. Brossardt said only part of this weak dynamism is explained by Bavaria's high starting level, and that conditions in emerging markets and established economies alike are improving faster than in Bavaria.

Wenn wir die Wettbewerbsfähigkeit unseres Standorts nicht nachhaltig verbessern, werden wir die Deindustrialisierung nicht stoppen.

Employer survey reflects pessimism

Bavarian metal and electro employers organized in bayme vbm view the development of location conditions over the past 10 years negatively. In a recent survey, 46% reported a clear deterioration and 42% reported a deterioration, though the question referred to conditions in Germany as a whole rather than Bavaria specifically.

Brossardt, who also serves as chief executive of bayme vbm, said structural location problems are putting the state under massive pressure, compounded by geopolitical crises, aggressive US tariff policy and other external factors.