Market update: Germany

Written by
Changeboard Team

03 Jun 2013

03 Jun 2013 • by Changeboard Team

Global economic player

The truth is that despite being overtaken by China in 2010 as the world’s largest exporter, Germany still represents 8.7% of global exports. It is the largest economy in Europe and the rate of projected growth in 2013 is far higher than any other Eurozone economy. It also enjoys a place at the top table of the G7 group of global economies. This positivity is set to continue with economic growth of between 2.3% and 2.6% expected in 2013, an improvement of 1.7% than this time last year.

When we drill down into this success, the majority (99%) of Germany’s GDP comes from industry and services. This image of the German ‘powerhouse’ is really put into perspective when you realise that only 0.9% of national GDP comes from the agricultural sector.

On top of this continued growth, the German economy will also see increased support in 2013 with the former Communist East set to receive over €60 billion in transfers for the development of infrastructure and other investment. The main beneficiaries of this will be the German phenomenon; the Mittelstand (or SME) companies. This is a key market for the local economy with seven out of ten Germans employed by the Mittelstands. Currently there are over three million privately owned firms employing up to 500 staff, mostly in engineering and production.

The employment impact

With so much positive economic momentum there has been, and will continue to be, a significant impact on the labour market. Most observers now see 2013 as the year when things start to move forward again. Many companies are already formalising their agreements with head hunters, dusting off contracts and strengthening their ability to up scale the workforce. Those that aren’t will simply lose out and will struggle to compete as they leave it late to enter the race for the best candidates.

The demand for the high calibre candidates has never really dropped below supply level, meaning that even now it’s challenging to identify and secure really strong talent. Add to this the fact that, unlike Britain or France where business tends to be concentrated around the capital, Germany is decentralised with certain regional concentrations. For example: heavy industry in the Ruhr and Rhein areas, financial services in Frankfurt, advertising and creative in Dusseldorf, digital technologies in Munich and Berlin, and automotive in the southwest.

There are two further employment factors which make recruiting in Germany more of a headache than in some other Eurozone countries. Relocation is undesirable by the local talent. In fact, candidates will often specify a desired position with location as the main criteria, and likewise will turn down clearly superior roles in favour of a preferred location. 

Low levels of mobility also present a challenge in local talent attraction. German employers are seeing a greater need to develop and promote their top talent to retain them and are investing in employee engagement. However, we are starting to see a change in mindset. Where companies could once expect high levels of loyalty with the progress of time, the new generation entering the workforce are changing attitudes, albeit slowly. It’s still perfectly normal to be dealing with candidates with 10 years’ experience working for the same company. Candidates with less than 5 year’s tenure are seen as job-hoppers, a stark comparison to other parts of Europe, particularly in eastern countries where the norm can be often be 18 months.

Future developments

It’s perfectly understandable to assume that as the German economy strengthens, demand will increase across the board. However, there are areas where the market will quickly get very competitive. In an environment driven by exports of manufactured goods demand will clearly grow rapidly for qualified engineers, sales management, logistics and supply chain. However, other functions such as marketing (particularly digital), accountancy and HR are also expected to grow. In certain IT disciplines there is already a significant lack of available expertise, and as a result if the local labour force cannot satisfy demand more companies will look to import talent from other EU zones and even beyond.

As the global dynamics change some new trends are emerging. For example, one side effect of the rise in Chinese manufacturing, particularly for automotive and other value added products, is that they now need quality engineering professionals and other managers. And where better to look than the country they have just overtaken in the global export league table – Germany. As the latest reports reveal that more Southern European talent is making the move into this thriving economy, it’s perhaps fair to say that 2013 will be a good year for Germany.