VDMA: Do not jeopardize open markets and prosperity!
Mechanical and plant engineering companies in Germany and Europe need open markets and free trade in order to achieve successful exports and secure jobs.
- Mechanical engineering companies expect more action from policymakers to promote free trade
- Production forecast 2017 confirmed: up one percent
- Still more than one million people employed in Germany
- VDMA denounces excessive red tape
Mechanical and plant engineering companies in Germany and Europe need open markets and free trade in order to achieve successful exports and secure jobs. Given the increasingly nationalistic trend in Europe and many other parts of the world, VDMA is therefore demanding – especially in 2017, an election year in Germany – that policymakers work harder to maintain free trade and promote the concerns of medium-sized industrial companies. “Walls and protective tariffs are not the answer! The EU and the German government need to make a visible commitment to Germany as an industrial country and thus to securing jobs and prosperity,” emphasized VDMA President Carl Martin Welcker at the Association's annual press conference in Frankfurt.
In view of mechanical engineering's export quota of more than 75 percent, he warned, “Re-establishing trade barriers in a globalized world is the wrong approach and will ultimately disadvantage everyone. We cannot recklessly jeopardize everything we have achieved and let populists take over.”
Slight growth in production expected for 2017
VDMA still anticipates a slight rise in production of one percent in real terms for the coming year. The strain coming from some large developing and emerging countries is expected to reduce, while the slight recovery in the EU partner countries (excluding the United Kingdom) will continue. On the other hand, uncertainty in the UK and USA is set to continue. Exports to China could fall again in the coming year. However, VDMA's latest business climate survey of member companies with operations in China shows that they have recently become noticeably more optimistic. The balance of positive and negative assessments of the current situation has doubled since the summer, to 18 percentage points. Companies there clearly expect to benefit from projects funded with billions of euros from the Chinese government.
The Association anticipates further stagnation in production in 2016 compared to the previous year. In the first ten months of this year, production in mechanical engineering fell by 0.7 percent (inflation-adjusted). Because this fall is largely due to fluctuation in the number of working days, VDMA economists are confident that it will even out again by the end of the year. Production has barely seen any progress since 2012. Capacity utilization in mechanical and plant engineering was 84.6 percent in October, putting it below the long-term average for the mechanical engineering industry (85.9 percent). More than a quarter of the companies (26 percent) complained about barriers to production in October, caused by a shortage of orders. Worldwide turnover of machinery is also stagnating.
“This is certainly not a broad-based economic upturn – and there is no sign of stimulus for growth,” said Welcker. Given this economic environment, he continued, it is remarkable that the number of people employed in mechanical engineering remains above the one million mark in Germany. 1,019,000 people were permanently employed in mechanical and plant engineering in Germany in September.
Demand to reduce red tape
Especially with the German election coming up in 2017, VDMA will actively denounce the increasing strain being put on medium-sized companies by new rules and the red tape that goes with them. As examples of regulations that cause unnecessary costs, VDMA President Welcker named reporting obligations for corporate social and environmental responsibility, client liability under the Minimum Wage Act, the Equal Pay Act and the Part-time and Temporary Work Act. “Small and medium-sized companies in particular face more and more organizational challenges,” said Welcker. This costs a lot of money that could be better spent elsewhere, for example invested, complained the VDMA President. “Policymakers have unfortunately failed to recognize that bureaucracy can also slow down growth.”
Mechanical engineering companies shaping digitalization
Despite some skepticism, mechanical and plant engineering companies see themselves as playing a pioneering role internationally in the digitalization and connection of production (Industrie 4.0). A new study by VDMA's IMPULS Foundation shows that the topic has now reached the full range of mechanical and plant engineering companies, explained Welcker, and more and more companies are pursuing a clear digitalization strategy. “Some consultants claim that Industrie 4.0 is passing medium-sized industrial companies by, but this is not the case,” he emphasized. However, Welcker believes that more needs to be done in staff development and further training, for example. “Industrie 4.0 and Work 4.0 are inextricably linked.” The issue of IT security will also take a lot of work, he said. VDMA recently launched a pilot project in this field, the start-up University4Industry, which offers online courses on industrial security in order to establish expertise in this core aspect of digitalization.
“The digitalization of industry will only be a success if policymakers create the right conditions. Our industry in Germany is world class, but we still need a data infrastructure that is equally good – not just in big cities, but also in the rural regions in which many of our staff live,” demanded Welcker. In addition, said the VDMA President, data sovereignty – the right to command one's own data – must be secured. “The idea proposed by some people of forcing companies to disclose business data in order to allow other companies to access the market is counterproductive. There cannot be a data free-for-all.”