Public transport spending benefits German economy, but railway investments drive up construction costs - reports

Government spending on Germany’s public transport brings clear economic benefits, but the planned railway investment package could trigger a price hike in the construction sector, according to two separate analyses looking at the financial impact of Germany’s public transport system, which plays a key role in the country’s decarbonisation plans but needs dozens of billions of euros in public money.

An analysis commissioned by national railway company Deutsche Bahn and carried out by the Technical University of Munich found that every euro spent on public transport ultimately adds three euros to the country’s GDP. Operating buses, tramways, subway lines, or regional trains costs the country about 25 billion euros per year, but brings in roughly 75 billion euros in additional value added, the analysis found. “Public transport not only is a means of transportation, a tool for climate action, and a service of general interest, it also is a booster for the economy,” said Jan Schilling, head of Deutsche Bahn’s regional department.

The economic benefits of public transport include easing the burden on commuters, the strengthening of local industries and tourism, fewer accidents in the transport sector, reduced land use, less noise and air pollution and also lower carbon emissions, the analysis said. “If today’s transport volumes were fully transferred to motorised individual transport, this would lead to additional costs of nine billion euros per year,” Deutsche Bahn argued.

However, a different analysis by economic research institute ifo found that construction costs in the railway sector have recently “exploded,” suggesting that the influx of public money into the transport sector encouraged companies to increase their margins. The analysis found that prices in railway construction had climbed twice as fast as those for road construction, meaning inflation could not fully explain the increase in overall costs, according to a report by newspaper Tagesspiegel. The federal government and Deutsche Bahn increased investments four-fold between 2011 and 2024. But the proven physical amount of new installations only increased about 21 percent during the same period, the ifo found.

Since 2018, federal investments in Deutsche Bahn have increased markedly, partly due to the state-owned company’s role in climate policy. Deutsche Bahn also hopes to receive a large chunk of Germany’s 500-billion-euro special fund for infrastructure and climate neutrality. It wants to secure 148 billion euros to further expand and modernise the country’s railway network.