Movinga recently completed a study which investigates the possible benefits of foreign human capital in Germany. In order to do this, research was conducted into each of the 16 federal states. The number of firms receiving venture capital, the number of patent applications, the unemployment rate, and the percentage of the state that were born in another country were all examined. The findings show that German states with a higher percentage of foreign-born citizens see higher levels of innovation. They also illustrate that attracting more people from other countries does not mean higher unemployment.
In order to analyse the possible benefits of foreign human capital, the diagrams compare the key indicators on innovation and economic prosperity (firms accepting venture capital, patent applications, unemployment) with the percentage of the population that are born in another country. All data used for this report was provided by The Organisation for Economic Co-operation and Development (OECD) and the German Federal Statistical Office (Destatis).
With 81.4 million citizens, Germany is Europe’s largest country by population. It is also the nation with the largest foreign-born population in Europe, with more than 7.8 million (9.6%) originating from another country. However, this diversity is not evenly spread across Germany’s 16 federal states: five states have more than 10% of citizens who are foreign-born compared, whereas five states have a foreign-born population of less than 3%. This disparity is illustrated in Figure 1.
Figure 2 shows that the city states such as Berlin and Hamburg that have a higher percentage of foreign-born citizens are also home to a higher number of firms receiving venture capital. Similarly, Figure 3 displays that the two federal states with the most patent applications (Bayern and Baden-Württemberg) are also diverse demographically, with around 10% of their populations being foreign-born. In contrast, Figures 1, 2 and 3 also convey that the federal states with fewer firms receiving venture capital and lower numbers of patent applications like Sachsen-Anhalt and Mecklenburg-Vorpommern have smaller foreign-born populations.
Figure 1- Distribution of foreign-born workers in Germany
Figure 2 - Number of firms receiving venture capital
These findings convey that people born in other countries are of great economic value, and that an attitude of openness to foreign-born citizens is important in order for support innovation, research, development and growth. The relative weakness of the federal states with fewer numbers of people born in other countries suggests that they could boost innovation and their general economic performance through attracting more talent born outside Germany.
Figure 3 shows Bayern and Baden-Württemberg also have some of Germany’s lowest unemployment rates, whereas Sachsen-Anhalt and Mecklenburg-Vorpommern have some of the highest unemployment rates. This shows that having a higher number of foreign-born citizens does not mean that fewer people will be able to find jobs. Unemployment is higher in the diverse states of Berlin and Hamburg compared to the national average, but this is more indicative of their unusual positions as city states rather than their economic weakness.
‘The impressive amount of firms accepting venture capital and the number of patent applications in the diverse regions of Berlin, Bayern and Baden-Württemberg suggests that foreign human capital helps support innovation and growth’ said Movinga's MD Finn Age Hänsel.
Figure 3
Business insurance firm Hiscox recently produced a resource that might be useful for businesses pre- and post-Brexit. It is a side-by-side comparison table of the UK, France and Germany and displays how easy it is to do business in each country.
It features all the main tax rates, employment laws, costs and incentives in each of the three biggest economies. The resource is designed for those businesses in the UK considering relocating to an EU country after Brexit.
You can view the full table in a pdf here.
(Source: Hiscox)
As a founder of one of the two merged firms, Michael Siebold now acts as one of the managing partners of Arnecke Sibeth, an independent full service firm based in Germany. Michael’s key responsibilities in managing the firm include HR and PR while, as a lawyer, he is mainly involved in infrastructure projects and corporate transactions that are almost exclusively cross-border.
Could you tell us a bit about your career path?
Following my clerkship (‘Referendariat’) in Munich, I did my LL.M. at the University of Toronto, followed by some practical working experience in Canada before relocating to Germany. I have always been very business and commercially orientated. In 1989, I found the firm that today, after mergers in 2000 and 2015, is now Arnecke Sibeth. I embarked on this journey with one associate, who quickly became a partner and remains a pillar of our firm to this day. As a firm, we soon specialized in transportation, aviation and logistics as an industry; and developed that practice to become one of the leading practices in that area. We now offer a full range of corporate legal services, to a range of industries and sectors.
What are Arnecke Sibeth’s top priorities towards its clients? How have these evolved over the years?
Two priorities stand out, from the many that I could mention: Truly adding value to our clients’ businesses and fair, intelligent, value-add based pricing. One of the key ways we look to add value to our clients is through our membership of elite global legal network Interlaw. Our affiliation with this network of more than 7,000 expert lawyers around the world means that we can easily and safely recommend legal advisers to our increasing client base, which looks to work internationally. We are also able to project manage multi-jurisdictional projects on behalf of our clients, providing one point of contact and one invoice for cross-jurisdictional deals or cases.
Additionally, with digitalisation being an increasing focus, some services, traditionally provided by lawyers, are expected to soon be commoditised. As a result, we are constantly evolving the products that Arnecke Sibeth offers and the skills that our lawyers have, so the advice and services we provide truly add value to our clients’ businesses. Simultaneously, hourly billing has been replaced by value-add based schemes, where a client pays on the basis of the value our law firm brings to their business or a transaction, rather than on the time spent working on the particular case.
You are also the Chairman of the global legal network of independent law firms worldwide called Interlaw– could you tell us a bit more about the organization and your involvement in it?
Indeed, I have had the privilege to serve as Chairman of Interlaw for five years so far and, together with an experienced international board and a lean but truly excellent staff, to steer the business of one of the most innovative international legal platforms. Based on personal relationships, often including decades-long friendships, Interlaw provides a platform where leading lawyers can cooperate seamlessly for the benefit of their clients, while being able to offer bespoke on-the-ground expertise in each jurisdiction.
Through our selective due diligence and ongoing quality monitoring system, we ensure that we attract the best independent law firms in the jurisdictions where we have a presence. What sets Interlaw members apart is the mindset of going the extra mile for a fellow member firm’s clients. This differentiates us from many other traditional networks, multi-national firms and other organizations. Unlike what is often experienced when dealing with international law firms, as Interlaw members genuinely value working with each other, there is no infighting at any level; simply great service at fair market prices. For Arnecke Sibeth and our clients, being a member of the network has opened doors to many new opportunities.
With your background as a common lawyer for a while in Canada in the mid-80s, you are often invited to speak on the relationship between Canada and Germany - what are the hottest topics being discussed in regards to this?
Canada and Germany, combined in their mutually shared views on almost all major political issues, are both working hard these days to make CETA a success on both sides of the pond. Poor communication and lack of information prevail where CETA is faced with skepticism, and this is the aspect that we are trying to assists with. Obviously, Brexit in whichever form, as well as future developments within the EU and the Eurozone remain hot topics on the Canadian-German agenda.
What lies on the horizon for you and Arnecke Sibeth in the near future?
We are well on our journey to becoming a truly national player in Germany, but will be filling some geographical gaps in order to wholly achieve this, namely in Hamburg and the Dusseldorf/Cologne area, where we are currently looking for suitable candidates. At the same time, we look to continue strengthening our base in core legal areas in the industries we focus on.
We plan to work hard toward marketing our service more than ever, through the in-depth knowledge of the industries and sectors that our clients work within. Matching the demand in a more digital world in the future will be a further task. As a response to this, we have a team led by young ‘digital native’ partners who work on solutions both for the firm and, more importantly, for our clients.
PNE Wind is a leading onshore and offshore wind farm developer, with projects in Europe, North America and South Africa. The company offers commercial and technical management services and currently manages 1,400 MW of wind farms. To date, PNE Wind have released over 2,400 MW onshore projects and have sold 7 large offshore projects. By covering the entire value chain, the firm is able to offer complete services spanning from origination to turn-key operations. PNE Wind’s customers include insurance companies, infrastructure funds, utilities and communities. Here to tell us more about the company and its achievements is PNE Wind’s CEO - Markus Lesser, who has a 25-year career in the international energy sector.
The energy industry has expanded exponentially in the past few years – what are currently the hottest topics being discussed in the sector in Germany?
The German government has committed itself to increasing the amount of renewables from approximately 32% today to 55-60% by 2035 and the future of further investments remains positive. In Germany, we’ve just had new legislation coming into force in the beginning of January 2017, which will see the market transitioning from a fixed feed-in tariff regime to a tender process. Tenders represent an additional step in the development process and add a certain amount of new uncertainty in the market. For projects to be released in the future, they will first need to be successful in a competitive bidding process, where the lowest bids are most likely to be awarded. This will force all market participants to think about how they can reduce costs and bring the best projects to market. While this transition will likely be a bit rocky, in the long term, lower energy prices are necessary for continued public support. As an international project developer, we have participated and also won in tender processes so we also see opportunities to leverage our strong position in the market and thereby, continue to benefit from global investments in wind energy.
What is the current state of overall investment in the energy sector in Germany?
The only new capacity which is being brought online today is either wind or solar. Of the 70 GW of new power capacity added to the German grid over the past ten years, this has essentially all come from renewables. Wind energy has proven itself to be a reliable and very secure form of power generation and investor demand for new projects is high. The German grid is however becoming increasing saturated with power and each new MW of power generation essentially pushes the more expensive generation capacity from the grid. So in this regard, there is a natural tension between the various power suppliers as traditional utilities with coal, gas and nuclear generation capacity fight to keep market share. The problem with many of these technologies is that they come with a huge social cost, the effects of which we are just beginning to understand. Fortunately, the world’s governments have come together with the signing of the Paris Climate Agreement and a coordinated global action to reduce CO2 emissions is now underway.
Germany is the world’s third largest market for renewable energy investment–-what is the legislative framework supporting investors across all renewable energy segments in Germany and how favourable is it when compared to other leading markets in the global energy industry?
The German government has been supporting the development of renewables for the past two decades and this initial support acted as the catalyst to get the industry started. Without this strong German regulatory support, renewables would not have reached the necessary scale needed to drive innovation and investments. As the technology matured, the government was reviewing the regulations on regular intervals with the goal of eventually having wind and solar compete on a non-subsidised basis. At this point, the price wind farms receive for power represents only a fraction to the amount the end consumer pays for his or her utility. Germany is an attractive market for renewables, not because the support mechanism alone is high or low, but rather because investors are confident that the government will continue to honour its obligations. Certain emerging markets offer substantially higher subsidies for wind than Germany, however investment levels there remain low, since investors believe that there is too much regulatory risk.
You have more than 25 years of experience in the international energy sector – what motivates you about operating within the sector?
I was able to see how the sector changed from being slow and steady to becoming very dynamic. Energy is the most important precondition to increase the wealth of countries and reducing the impact of climate change, so to work on the technical and financial solutions for low-cost energy, while also working towards reducing the impact of climate change with such an entrepreneurial approach is my biggest motivation.
How did your career path lead you to your current position?
When I started my career, I was a Quality Engineer and later on I was the Head of Sales of wind turbines of Nordex AG. My beginnings in the field included non-structural engineering work, which taught me how to sell and deal with different mentalities – something that has helped me a lot in recent years in the business and in project development.
You were appointed as PNE Wind’s new CEO in April 2016 – what have been your major accomplishments since then?
Project development is a multi-year process which involves interacting with a number of stakeholders. At the beginning of the process, we work closely with land owners and local governments to secure the needed land for development. As the project progresses, we actively engage with the planning permission bodies to secure the necessary building permits. As these processes are accomplished one by one, we arrange the project financing, secure the turbines and ultimately build the turn-key project for our customers. Behind each step are hundreds of man-hours and preparation. What I am trying to illustrate here is that there are many steps along the way that need to be followed before the final project can be released. While my major accomplishments may be summarised by the number of projects completed this year, which is over 100 MW, there were thousands of backstage victories along the way, which are just as valuable for us.
How has your work in the past 6 months impacted PNE Wind’s overall performance in 2016?
In 2016, we managed to finalise the sale of the 142 MW wind farm portfolio, which is the largest wind farm sale in PNE Wind’s corporate history. To get this done in time and in the cost expectations we had was definitely our biggest achievement in the past six months.
What are some of the challenges of being the CEO of one of the leading German wind farm developers?
First of all, I would like to point out that our presence is not only limited to Germany, since we’re also operating onshore. The main challenges that I am faced with are the constant market changes – which means that we have to steadily improve all of our processes and the way project development processes work at all times. We have to be clear, in respect to finding new models of financing and collaboration, in order to end up with high-quality projects, which will be attractive to the market.
Looking into 2017, what trends do you predict for the wind power sector in Germany and globally?
Prices have been decreasing, which means that we’ll have to be keep aiming at being more and more effective – better machines, lower pricing in the whole value chain, etc. In believe that the emerging markets will become more important in the global wind power sector because renewable energy becomes more and more competitive, which will definitely result in change in regulations.
2017 will continue to be mainly focused on lowering emissions, which means that there is a good perspective for Germany, since it still is the biggest market for renewable energy in Europe.
What does 2017 hold for you and PNE Wind?
As I mentioned, we expect a decrease in pricing, so in order to continue being successful, we’ll have to be faster in the project development processes. We have already been working towards this goal by developing our Smart Development system, as well as an optimized package, which will help us optimize our wind farming services.
Germany’s small businesses are the most optimistic about their own economy according to the inaugural Global Business Monitor report from international business funder, Bibby Financial Services (BFS).
Nearly three-quarters (73%) of German SMEs say their national economy is performing well in the global study that surveyed business owners in the US, Germany, UK, Poland, Hong Kong and Ireland.
More than two thirds (67%) of Irish SMEs are confident about the local economy. German and Irish SMEs are also most confident about the future with 57% of SMEs in both markets expecting sales to grow in the year ahead.
Conversely, less than one in five businesses in Hong Kong (15%) say they are confident about their local economy, with less than a quarter (24%) expecting sales to increase in the next 12 months.
Steve Box, International CEO of Bibby Financial Services said: “Germany is often seen as the industrial beating heart of Europe. Our research underlines the confidence of the small businesses in Europe’s largest economy as the EU looks to agree its shape post-Brexit.
“It is a different picture for the economy in Hong Kong where the majority of business owners are pessimistic about future sales and the local and global economies.”
The study reveals the sentiment of global SMEs in areas such as investment, confidence, challenges and opportunities, overseas trade and payment terms. In relation to international trade, findings show that small businesses in Hong Kong are three times as likely (69%) to export as those in the UK (22%) and seven times as likely as in the US (10%).
Steve added: “Due to its geographical location, Hong Kong is an important gateway to trading activities between China, the US and Europe. Its economy is highly export driven and this may explain why confidence is subdued during a time of economic change and significant currency fluctuation.”
Across the study, almost a quarter of businesses (24%) said that foreign exchange fluctuations are the biggest challenges they face in relation to international trade. For SMEs in Poland and Hong Kong, figures rose to 46% and 37% respectively.
Despite pockets of confidence in their local economies, the research reveals that nearly three-quarters (73%) of all SMEs have concerns about the global economy, with those in the US (83%) and Ireland (82%) the most concerned.
Steve concluded: “It’s clear that confidence in the global economy has suffered due to macro-economic and geo-political events in the last six months. The real question is for how long will confidence be affected?
“It is likely that the UK’s formal exit from the EU – commencing with the triggering of Article 50 by the end of March next year – will have further economic consequences that will be felt around the world.
“As the world shapes itself with a new US president and an EU without the UK, it is those small businesses that can adapt to changing domestic and international trading conditions that will be best placed to profit and grow in 2017.”
Other key findings of the Global Business Monitor report include:
Challenges
- Rising costs are a challenge for half of all SMEs surveyed (50%) – the most frequently cited.
- One in five businesses describe the availability of finance as poor.
Investment
- Despite concerns over the global economy, 95% of SMEs plan to invest in their business in the next 12 months, with staff training, promotional activity and technology the most popular areas.
- SMEs in Germany and the US are most likely to invest (98%).
Payment terms
- Irish SMEs wait longest for payment from customers (38 days) followed by those in Hong Kong (37 days).
- In contrast, US SMEs are paid two weeks quicker (24 days).
- Manufacturing (39 days) and construction (40 days) businesses typically wait longest for payment when compared to other industry sectors.
Source: Bibby Financial Services
The European Central Bank has announced its June policies, which include leaving interest rates unchanged and hinting at further action if inflation fails to improve. President Mario Draghi said at a press conference that external shocks, such as a possible exit from the EU for Britain, would affect the market negatively and he recommends that the UK remain in the EU.
Mr. Draghi hinted that there is still the possibility for future stimulus if needed. This is following the ECB’s increase in its qualitative easing programme in March from €60 billion to €80 billion. The ECB will also start buying high-grade corporate bonds in early June.
The euro barely reacted to the news that interest rates will not be changed. Most recent forecasts now expect inflation to hit 0.1% this year, 1.3% in 2017 and 1.6% in 2018, possibly due to a rise in oil prices.
David Cheetham of XTB.com comments: “As was widely expected the ECB have announced that they will make no alterations to the three benchmarks interest rates or QE programme following the conclusion of their latest meeting. During the press conference shortly after the rate decision President Draghi struck dovish chords as the markets have grown accustomed to in recent times, stating the rates will stay at present or lower levels for some time. Market reaction so far has been fairly subdued with the slight upward revision to this year's inflation forecast of 10 basis points arguably the biggest takeaway, but seemingly not a big enough development to cause a sustained market move.”
David Cheetham is a market analyst at XTB. For more information about him, please visit: https://www.xtb.com/en/market-analysis/our-analysts/david-cheetham
Deutsche Bank reaffirmed its commitment to being a leading global bank based in Germany when it announced the next phase of its strategy, covering the period through to 2020, at the end of April. The bank’s announcement covers key strategic decisions, division-specific initiatives and financial targets.
Jürgen Fitschen and Anshu Jain, Co-Chief Executive Officers, said: “This marks the next milestone in the journey we began in 2012. Deutsche Bank’s course is clear. We reaffirm our commitment to being a leading global bank based in Germany. To achieve this, we must remain client-centric, but focus more sharply on mutually attractive client relationships; remain global, but become more geographically focused; and remain universal, but avoid trying to be all things to all people.”
As a result of its strategy review process, the bank took six new decisions which support the next phase of its strategy. The bank’s objectives are to:
- Build a more focused, relationship-driven investment bank;
- Reshape its retail business to focus on an advisory-led proposition and de-consolidate Postbank;
- Deploy digital technology across the platform;
- Invest to accelerate growth in GTB and Deutsche AWM;
- Rationalise its geographical footprint by exiting or reducing its presence in some countries;
- Transform its operating model to achieve higher efficiency, reduced complexity, better resilience and resolvability.
Corporate Banking & Securities (CB&S) aims to further de-emphasise lower-return business, increase its focus on client solutions and invest in growth in higher-return products. CB&S plans to reduce gross leverage by approximately €200 billion, while redeploying €50-70 billion to improve its position in relationship-driven businesses.
Deutsche Bank also said it plans to invest up to €1 billion additionally over the next three to five years in digitisation to capture new revenue opportunities, for example, through remote advisory channels; realise platform efficiencies through automated or digitised processes; and develop new client propositions.
Through 2020, the Bank’s objective is to refocus its global footprint, reducing the number of countries or local presences by 10-15% and actively investing in markets and urban centres which are most relevant to international and multinational clients.
Simon Michaels, Managing Partner at BDO
Mid-sized businesses in the UK have weathered the global downturn better than those in the renowned German Mittelstand, according to new figures released by business advisory and accountancy firm BDO.
BDO’s snapshot of the European mid-market shows that the turnover of the UK's mid-sized firms (€1.92 trillion) now exceeds that of the German Mittelstand (€1.78 trillion). BDO defined the mid-market as firms with turnover between £10 million - £300 million (€14 million - €414 million) annually.
Since 2009, the Mittelstand has grown by 12% compared to the mid-market by 33%. The UK has also overtaken Germany in terms of the number of people employed in their respective mid-markets – the UK employing 9.3million people compared to Germany's 9.2million.
The Mittelstand forms the backbone of the Germany economy with approximately 43,500 companies and has traditionally led the way for mid-sized businesses in Europe.
However, despite faring better through the global recession than other European financial centres, the Mittelstand is facing fierce competition from elsewhere on the continent. Mid-market growth in Italy and France has surpassed that of Germany at 16% and 20%, respectively. Although their markets may be smaller, BDO's results give a clear indication that the potential for mid-market businesses is on the up across Europe.
Simon Michaels, Managing Partner at BDO, said: "The UK mid-market is leading Europe. This is a massive achievement – one that we should be proud of, but not complacent about.
"Germany has always invested in its mid-market; it has policies directly aimed at the Mittelstand and culturally the Mittelstand stands as the economic backbone of the nation. While the UK's mid-sized businesses are worth more than the Mittelstand for the time being, there is so much more we can do to cement our position as Europe's mid-market leader."
BDO has introduced its Mid-Market Manifesto, a set of policies that could unlock the potential of the UK's mid-market, adding over £1.3 billion (€1.8 billion) to mid-sized companies' GDP contribution and creating thousands of jobs.
Some of BDO's specific policy recommendations include:
- Temporarily reducing employers' National Insurance for manufacturing companies
- Awarding government contracts on the basis of the employment and training benefits to the supply chain, not cost alone
- VAT zero rating of supplies to companies that export
