Foreign direct investment in Germany rose by 50% in 2025 to around €86 billion, with investment from British companies surging sharply and helping to offset a steep decline in US capital flows. The figures, based on German central bank data and analysed by the German Economic Institute (IW), show that the UK became Germany’s largest single source of foreign investment during the year.
The rebound represents a notable change in the composition of investment into Europe’s largest economy. British companies invested about €26 billion in Germany, an increase of roughly 284% from the previous year. At the same time, US investment fell by almost 44% to €11.8 billion.
Why did foreign direct investment in Germany rise so sharply?
Germany received approximately €86 billion in foreign direct investment in 2025, up from about €57.5 billion the previous year, according to Deutsche Bundesbank balance-of-payments data. The increase halted a period in which direct investment inflows had generally weakened following the Covid-19 pandemic.
The German Economic Institute calculated that the 2025 total was nearly 11% above the median level recorded between 2015 and 2024. However, researchers cautioned that FDI flows can fluctuate substantially from one year to another, meaning a single year of growth does not necessarily establish a lasting reversal.
The distinction is important because other measures of foreign investment activity in Germany showed a weaker picture. Germany Trade & Invest reported 1,564 foreign investment projects in 2025, a 9.3% decline from 2024. Its measure covers greenfield, expansion and relocation projects but excludes mergers and acquisitions.
How much did UK companies invest in Germany?
British companies invested around €26 billion in Germany in 2025, according to the IW analysis. That represented an increase of approximately 284% compared with the previous year and gave Britain a share of almost 31% of Germany’s total foreign investment inflows.
The result placed the UK ahead of the United States as Germany’s biggest individual source of foreign investment. It also underlines the continuing importance of cross-border corporate investment between Britain and continental Europe despite the UK’s departure from the European Union.
The figures should not, however, be interpreted as evidence that British businesses have suddenly replaced European investors in Germany. Other EU countries collectively supplied about €43 billion of investment, despite a 2.7% annual decline. Together, they accounted for more than half of total inflows.
Why did US investment in Germany fall?
US investment in Germany dropped almost 44% in 2025 to €11.8 billion, according to the IW calculations. Its share of total foreign investment fell to roughly 14%, compared with more than 36% in 2024.
That decline was large enough to make the British increase particularly significant. The overall German FDI rebound therefore did not reflect broad-based growth from every major investor. Instead, it was heavily influenced by changes in the source and composition of capital entering the country.
Such movements can be affected by corporate restructurings, intra-group financing, acquisitions and other large transactions, meaning annual FDI figures can sometimes move sharply without corresponding changes in the number of new factories or other physical investment projects.
What does the €86 billion figure tell us about Germany’s economy?
The €86 billion inflow provides evidence that international companies continued to allocate substantial capital to Germany despite concerns about the country’s competitiveness, high energy costs and weak industrial performance.
Germany’s central bank said the 2025 recovery stopped the previous downward trend in direct investment inflows, but warned that it could not yet be regarded as a definitive turnaround. Just under 40% of the inflows came through equity capital and intra-group lending, while reinvested earnings accounted for slightly more than one-fifth.
This composition matters because FDI is broader than spending on new production facilities. A rise in total flows does not automatically mean that Germany experienced an equivalent increase in new factories, jobs or productive capacity.
Germany Trade & Invest’s separate project figures illustrate the distinction. It recorded 1,564 international investment projects in 2025, down from the previous year, while the volume of those projects fell by almost half.
Does the rebound mean Germany is becoming more attractive to investors?
The latest data suggest a more complicated picture. Germany remains a major destination for multinational companies, but investors continue to assess the country against concerns over energy prices, regulation, labour costs, infrastructure and economic growth.
Germany nevertheless performed relatively well against international trends in the number of investment projects. GTAI said global foreign investment projects declined by 9.5% in 2025, while the European Union recorded an 18.1% fall. Germany’s 9.3% decline was therefore broadly in line with the global movement and considerably better than the EU average.
The country’s large domestic market, industrial base, skilled workforce and position within Europe’s single market remain important factors for international companies considering investment.
The Bundesbank’s longer-term figures also show the scale of Germany’s international investment relationships. At the end of 2024, European countries accounted for €471 billion, or 64%, of Germany’s inward FDI stock, with EU countries responsible for €355 billion.
What could happen to German FDI next?
The immediate question for policymakers and businesses is whether the 2025 increase represents the beginning of a sustained recovery or simply a strong annual fluctuation.
The Bundesbank has taken the cautious view, noting that although inflows increased markedly, they remained below levels seen at the beginning of the decade. That suggests Germany still faces a longer-term challenge in restoring the investment momentum it enjoyed before the pandemic.
For Britain, meanwhile, the scale of investment is notable because it places UK businesses at the top of Germany’s individual source-country rankings for 2025. The development could reinforce commercial links between the two economies at a time when companies on both sides of the Channel are adapting to a changed trading relationship.
The figures will also be closely watched by German policymakers seeking to strengthen the country’s competitiveness and attract investment into manufacturing, technology, energy and other strategic sectors.
The next set of FDI data will therefore be important. If British investment remains strong while broader international flows recover, the 2025 figures could mark an important turning point for Germany. If inflows weaken again, the €86 billion result may instead prove to have been a temporary rebound shaped by unusually large transactions.
