Hanover, Germany  -  German companies that set up plants abroad to take advantage of much lower wages often overlook the higher cost of management, according to a study released Tuesday at the Hanover Fair by a German association of engineers.

The study, conducted by the Fraunhofer Institute for System and Innovation Research, found the trend to move offshore was in decline at German industry, with only 9 per cent setting up any plant abroad last year compared to 13 per cent in the 2002-2003.

Steffen Kinkel, who did the study, said companies often did not consider the long time needed to get up to speed at a new site, the lack of a business network abroad or the high management cost of supervising the new location.

But he said companies continued to close factories in Germany and set up abroad. The annual loss of German jobs was 74,000, he calculated. The study was commissioned by the VDI, a group that campaigns for the engineering profession in Germany.

German Statistics Office figures Tuesday showed the average hourly payroll cost for a German worker totals 29.10 euros (46 dollars), making Germany the seventh most expensive labour market in the European Union after Denmark, Sweden, Belgium, Luxembourg, France and the Netherlands.

The average of the 27 EU nations was 22.80 euros.

Kinkel found significant numbers of German companies bringing foreign plants back into Germany after realising their mistake.

He produced a graph suggesting this was most common with moves from Germany to the "old" nations of the European Union, with 13 per cent of companies moving there and 30 per cent of those surveyed bringing production facilities back to Germany.

He advised companies to mainly move abroad to get closer to markets or closer to suppliers, not for the sake of low wages.

VDI quoted Norbert Mueller, chief executive of Rittal, a company that makes electrical fuseboxes and sells 70 per cent of its production outside Germany, who said, "We've deliberately opted to manufacture in Germany.

"Its economic structure is broad-based and staff are highly qualified. It's still a highly attractive location," Mueller added. (dpa)