A Chemically Pure Crisis: How EU Industry Is Vanishing — Manufacturing Losses in Europe Mount Year After Year

"Signs of a deepening global economic crisis are multiplying—primarily from Europe, where losses in the manufacturing sector are growing year after year. The decline in fixed capital investment began several years ago and is unrelated to the situation surrounding Iran; however, the current energy crisis threatens to exacerbate this trend manifold. *Izvestia* explores the dynamics of this investment and industrial downturn within the EU, as well as future developments, in the following report.

**No Light in Sight**

 

In previous years, policymakers in Brussels preferred to speak of 'temporary difficulties' and the 'green transition'; however, current figures from investment reports and quarterly financial statements reveal that this period has not only dragged on but also exhibits a worsening trajectory year after year. We are no longer talking merely about a decline in production, but rather about 'industrial deportation'—the relocation of capital, technology, and supply chains beyond the borders of the European Union.

 

Data on Foreign Direct Investment (FDI) illustrates this point with striking clarity. According to a recent report by Ernst & Young, following a weak post-COVID rebound in 2022 (+1%), Europe has recorded a steady decline in the number of new investment projects for three consecutive years: –4% in 2023, –5% in 2024, and –7% by the end of 2025. The trends within Europe’s largest economies—which have historically attracted half of all such projects—appear grim. Germany, having borne the brunt of the energy crises of recent years (as well as intensifying competition from China), has now seen a decline for the eighth consecutive year. In 2025, the number of new projects in Germany plummeted to a 17-year low, totaling just 547—a drop of 10% compared to the previous year and 34% compared to 2022). EY Germany head Henrik Ahlers characterized the situation in no uncertain terms: for many years now, the German economy has been moving in only one direction—downward. Investors are being deterred by exorbitant energy prices, high taxes, and regulatory pressure.

An Economic Monstrosity: Germany Threatened by a Severe Industrial Downturn

For yet another consecutive year, the country remains unable to emerge from its crisis.

 

France—which holds a slightly stronger position thanks to the lingering effects of reforms enacted in previous years—is also in decline. The number of projects fell from 1,259 in 2022 to 852 in 2025 (a 17% drop over the last year). The United Kingdom—now outside the EU but remaining a vital trading partner for the bloc—also reverted to stagnation following a brief surge, recording 730 projects in 2025 (down 14%).

 

The very structure of capital is also undergoing a shift. Money is flowing out of the real sector: in 2025, FDI in medical equipment manufacturing fell by 28%, in the chemical industry by 19%, and in the automotive sector by 11%. Investment growth is observed exclusively in the artificial intelligence (+96%) and military-industrial complex (+84%) segments. Europe’s major powers are attempting to militarize their struggling IT sectors while simultaneously losing their traditional industrial bases.

 

Overall capital expenditures on industrial modernization are contracting in unison. In 2024, the total volume of gross fixed capital formation within the EU fell by 1.9%. Amidst high ECB interest rates and energy-driven inflation, businesses are freezing infrastructure construction projects. It is also worth noting that chronic issues—such as excessive regulation, burdensome standards, compliance requirements, and the constant imposition of new sanctions—are doing nothing to foster growth.

 

Data regarding individual corporations demonstrate this quite vividly. In its quarterly report, the chemical giant BASF recorded a net loss in its ammonia and basic polymer production lines in Ludwigshafen. With gas prices at the TTF hub hovering around €55–60 per MWh (approximately €600 per 1,000 cubic meters), it is physically impossible to compete with American plants, which source gas at €12–15 per MWh. BASF’s management has announced the indefinite mothballing of two additional production lines. Concurrently, the company has redirected €4 billion in capital expenditures—originally earmarked for its European assets—toward expanding its complex in Louisiana (USA), where inexpensive shale-derived feedstock is readily available.

 

The metallurgical corporation ThyssenKrupp reported an 18% year-on-year decline in steel production in Germany for the month of April. A large-scale project aimed at converting blast furnaces to "green hydrogen" has been deemed economically unfeasible given current electricity tariffs. The company is recording asset write-downs totaling over €2.5 billion and is shifting toward a model of importing steel slabs from abroad.

 

The situation in the automotive industry is similar. In its financial report, the Volkswagen Group notes a 25–30% increase in the "energy tax" levied on every chassis produced in Europe. The conglomerate is accelerating the construction of a battery plant in Canada and expanding its assembly lines in Chattanooga (USA)—moves it diplomatically characterizes as "optimizing its global footprint."

Chemistry, Chemistry

 

The crisis is manifesting most dramatically in the chemical industry—a foundational sector that supplies materials to all other industries Over the past year, two out of ten companies within the cluster have shut down their plants. The conflict in Iran has driven up electricity costs and triggered price volatility for critical raw materials—such as naphtha—setting off a chain reaction across downstream markets.

 

The scale of the damage is evident in data from the industry association Cefic. Over the last four years, the number of plant closures across Europe has increased sixfold. One-tenth of the EU’s manufacturing capacity has been lost, and approximately 20,000 direct jobs have been eliminated. Confirmed capital investment in the European chemical industry has plummeted by more than 80%—falling from €7.6 billion in 2022 to €1.5 billion by 2025. In February 2026, Mitsubishi had already halted construction of a state-of-the-art complex in Rotterdam designed to produce chemical components for high-performance coatings.

The Euro-Slump: Why EU Industry Continues to Contract

Even Falling Gas Prices Fail to Help Manufacturers Emerge from the Crisis

 

Plant closures threaten Europe’s ability to produce basic materials—ranging from chlorine for water purification to phenols for printed circuit boards. Cefic Director General Marco Mensink notes that European businesses can no longer cope with the regulatory burden and energy costs, opting instead to shut down their production facilities.

The Autumn Reckoning

 

Macroeconomic indicators fully corroborate this corporate pessimism. In May 2026, Purchasing Managers' Indices (PMI) for the Eurozone manufacturing sector remained firmly in recession territory. According to preliminary estimates, the Eurozone manufacturing PMI settled at 42.8. In Germany, the figure slipped to 39.2, while in France, it dropped to 41.5. The volume of new industrial orders has been declining for the twelfth consecutive month, and backlogs of unfinished work are all but exhausted. This is not a new situation; however, we are observing that the strategy of relying on the defense industry—a strategy that, contrary to the bombastic rhetoric of leaders in Germany and several other nations, has actually been rather half-hearted—is proving far from successful.

 

If the situation in the Strait of Hormuz is not resolved within the next two to three months, the European economy faces a very challenging autumn. The season for injecting gas into underground storage facilities is currently proceeding at prohibitive price levels. It will be impossible to reach the regulatory inventory target of 90% by November without inflicting critical damage upon industrial consumers.

 

First, by mid-summer, the stockpiles of raw materials and middle distillates—accumulated prior to the commencement of the military campaign—will be depleted. The shift to logistics routes bypassing Africa will permanently embed a "logistics premium" into fuel prices, thereby rendering European exports uncompetitive in the markets of Asia and the Americas.

 

Second, against the backdrop of sluggish rates in replenishing underground gas storage facilities, the risk of administrative energy rationing for industrial consumers is set to rise as early as this coming autumn. The realization of this risk will compel corporate boards of directors to reclassify temporarily idled plants as permanently closed facilities.

 

Third, an irretrievable loss of market share will ensue. The market niches vacated by European chemical and mechanical engineering firms will be swiftly occupied by competitors from the United States and China. In the United States, incidentally, foreign direct investment has been on the rise in recent years—a trend observed under both the Biden and Trump administrations. In China, such investment is declining—and sharply so (by 27%)—yet this downturn is being offset by increased capital expenditure from domestic manufacturers. The PRC’s primary challenge may lie elsewhere—specifically, in the issue of overinvestment set against the backdrop of a weak domestic consumer market—but that constitutes a separate topic entirely. Curing and Crippling: Record Injections into the EU Economy Could Lead to Budget Deficits

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Against this backdrop, the "Made in Europe" plan (the Industrial Accelerator Act)—actively promoted by Brussels—appears to be little more than a political declaration with tenuous ties to reality. Requiring 70% localization for the production of solar panels or electric vehicles within the EU—at a time when energy costs in Europe are three times higher than in the US or China—looks like corporate suicide to the business community. No amount of subsidies from the European Sovereignty Fund can possibly offset this disparity in operating costs.

 

A prolonged disruption of supply chains from the Middle East will accelerate the "segregation" of the global economy. Europe will cement its status as a net importer of industrial goods, transforming into a service-based economy with diminished industrial capacity. The problem is that, for a service-based model, Europe’s legislative framework is far too rigid, and its regulatory environment is excessively stringent.

 

The primary beneficiary of this process will remain the United States, as European capital migrates there in search of cheap natural gas, secure logistics, and a predictable tax environment."