The capital of Germany maintains its legacy as a hub for science and research but significant investment in Berlin has seen it build a reputation as a young and creative city. Exec discovers more about this business hot spot
Written by Ellie Duncan
Amidst the current global financial crisis, Germany’s economy has so far proved its strength. The largest economy in Europe could yet enter a recession, though. There are now several signs that it is starting to panic as declining demand in foreign markets threatens to destroy its export market, the largest in the world – between 2000 and 2006, exports grew 38 percent. Meanwhile, Daimler has announced that it is to shut two large German plants for a month.
Without a doubt, the capital Berlin has played some part in stabilising the country’s economy and business up until now. One third of the world’s fifty largest companies have offices in Berlin, while its service sector has received funding from the European Structural Funds, targeted at its economy and infrastructure. In the six year funding period to 2006, Berlin received €1.3 billion and the same amount has been made available in the current funding period, which runs until 2013.
Christoph Lang, from Berlin Partner GmbH, makes the point that Berlin’s economy is particularly competitive when compared to the middle and eastern European capitals. “We found in the first half of this year that economic growth in Berlin was higher than the German average,” explains Lang. “We think that will go on, that Berlin will grow stronger because at the moment it is highly attractive.”
Lang also explains that what has been Berlin’s weakness in the past, the fact that it is not a financial hub like London or New York, has put it at an advantage now because it is not dependant on the financial markets.
“Berlin’s economy is a very small scale economy – you have many small and medium enterprises and these are much more stable in a crisis than big companies,” he adds.
SERVICE SECTOR GROWTH
Berlin is renowned for its prominent service sector, which employs more than 50 percent of the city’s population. Along with the growth of this sector though has been the decline of industry and construction. Despite substantial job cuts in these areas, the city still has a strong industrial core; in 2006, 96,000 people worked at manufacturing companies with 20 or more employees.
Today, Berlin is best known for its electrical engineering, food products, chemicals, mechanical engineering and car manufacturing sectors. Lang explains that these industry clusters have particularly good opportunities in Berlin and a “framework of conditions” which encourage growth.
The capital has traditionally been an academic, scientific, research and development landscape, a reputation that it maintains to this day. The world’s largest research-based pharmaceutical company, Pfizer, recently relocated its German headquarters to Berlin from Karlsruhe as part of a strategic move.
Country Manager, Andreas Penk, explains how it benefits from locating in the city: “Today, the development and marketing of new innovative drugs is more combined with a dialogue with the most diverse partners in different fields, from biotech companies to universities, doctors, hospitals and health insurance companies.
“Berlin is the best match for this requirement. Most German health care partners are located here or meet here.”
Historically, Berlin has been at the forefront of scientific breakthroughs, as Penk notes. “Pioneers of medical progress – Robert Koch, Rudolf Virchow and Paul Ehrlich to mention just a few – lived and worked in Berlin,” he says. “Now the city is carrying on the tradition as a hub of science, medicine and pharmacy.”
THE TOTAL PACKAGE
For investors and companies new to the city, Berlin Partner GmbH is the first port of call. It offers a range of business packages, as Lang explains, including business location, financing and recruiting packages. According to Lang, approximately 200 companies take advantage of the business recruiting package each year as recruitment becomes a more prominent issue for companies.
“There are many ways of profiting from locating in Berlin,” says Lang. “If you start up a business, you can receive up to 35 percent of your investment by public funding.”
Financial incentives are all very well, but the city has much more going for it, as Penk explains. “Berlin is a highly inspiring and interesting city to live in,” he enthuses. “We are excited by the scientific community and the many creative people who live and work here. The city offers great leisure opportunities – from arts, music and museums, to sports or nature.”
Lang has a similar perception of the city as a creative and vibrant place with a young population, no doubt attracted by its universities and colleges, as well as the burgeoning media industry and technology sector.
MEDIA HUB
Adlershof is a new district emerging in the southeast of the city and is being touted as the ‘City of Science, Business and Media’. Completion of the development is expected in 2010, and will comprise of apartments, shops, restaurants, schools and cinemas, while a combination of modern businesses and scientific institutes saw the location receive the ‘Award of Excellence for Innovative Regions’ in April 2002.
As well as harbouring a science and technology park, the development is set to become the heart of the media industry, housing the region’s largest studio location and one of the largest television studios in Europe.
In terms of transport links, Berlin is well-known for being a railway hub and more than €5.1 billion is being invested in the city’s railway network. In June, 2006, work finished on a nine kilometre route running north and south, while tracks between Berlin and other German cities continue to be modernised.
Meanwhile, a rather more ambitious transport project is underway, supported by the states of Berlin, Brandenburg and the federal government. The €2 billion investment will expand Schöenefeld Airport into a major airport, Berlin-Brandenburg International (BBI). Following its completion, which is scheduled for 2011, Tempelhof Airport and Tegel Airport will both be closed.
With so much money being invested in Berlin’s transportation systems, service sector, and new businesses, the capital is set to build on its reputation as a city at the forefront of innovation. Whether Germany is plunged into a recession or not, Berlin should have the economic strength to maintain its status as one of the most competitive business locations in Europe.