The service sector is of fundamental importance to Germany's economy. This sector deploys work for almost 75% of Germany's citizens, and by this simple fact, has a huge impact on the economy of the country and its economic power. It's also, not very surprisingly, the biggest sector with a share of almost 70% of the GDP. But what makes Germany such an interesting location for the service sector and what are the locational advantages that make this sector so overwhelmingly successful?
All of the big consulting companies like Ernst & Young, Deloitte or Kearney ranked Germany as the country with the best locational advantages in Europe. Germany would even be one of the Top 10 countries in the world, according to those studies. These facts are not just random figures, they are caused by fundamental locational advantages of Germany as a country. A major advantage is of course the excellent location of the country itself. Being located in the heart of Europe provides German firms short delivery routes across the continent and makes Germany an important organ in Europe's trade. But it's not just the trade firms that are attracted to Germany, it's also the banks, consulting firms or insurance companies that enjoy the advantages of this country. This is due to several reasons, like the good educational system or the marvelous labor productivity. The country provides the firms with exceptionally skilled workers that live in a country with one of the highest livability rates in the world. This whole package is backed with a well-functioning state of law, a very stable democracy and very liberal external trade policies. It's not a surprise that big players come to Germany and expand their business in Europe from there.
A forecast for the service sector
At the moment Germany is in the pole position, when you compare the service sectors in Europe. But the government also put huge pressure on the economic system with two fundamental reforms. First there was the plan to break even in terms of achieving a balanced budget. It's not necessarily a bad plan in general, but it might be the wrong moment to do so. Whilst other countries in Europe are trying everything to make this important sector more competitive, Germany is still remaining on the taxation pedal, to achieve this challenging goal. Instead it could be important to have a sound grasp of contemporary developments and to liberate the prevailing structures. This could be a reason for firms to favor other countries instead.
Another reason for a possible decline could be the pension reform of employment minister Andrea Nahles. Many firms dislike that Germany has lowered the retirement age to 63 because that could cause a serious unbalance in the prestigious social welfare system.