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Western Europe overtakes China and US as Number One Investment destination

Bahar Karaman

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FDI into Europe hits a new record with US$305b attracted into the region in 2014, translating to a 36% year-on-year growth, despite global growth slowdown.

Last year alone, 43 European countries – including Russia and Turkey – drew 4,341 projects reaching a 10% growth over 2013 and created 185,583 jobs (+12%).

According to 808 decision-makers polled for EY’s13th European attractiveness survey, launched today, Western Europe attracted 50% of investments worldwide in 2014, up from 45% last year, overtaking China as the most attractive investment destination, which saw a 6% decline in projects to 38%.

More than half (59%) of investors believe Europe’s attractiveness will improve in the next three years

More than half (59%) of investors believe Europe’s attractiveness will improve in the next three years

An increase in North American investment, up from 31% to 39%, placed it in second place and saw China pushed down to third place.

Marc Lhermitte, EY’s Head of International Location Advisory Services and author of the report says:

“The improvement in Europe’s relative attractiveness stems not just from economic stabilization and recovery in Europe, but also from the greater uncertainty about the emerging markets and their ability to continue delivering the growth rates achieved over the past decade.”

Lower energy prices, a weaker euro and quantitative easing have all added impetus to Europe’s investment appeal and resulted in almost 200 thousand new jobs created across the continent which is a very encouraging figure as employment is one of the key drivers of economic growth.

Country and city ranking: Who is winning the European attractiveness race?

More than half (52%) of FDI projects and 30% of jobs created by investments into Europe were captured by the top three destinations: the UK, Germany and France.The UK is still the number one destination in terms of FDI projects and jobs.

Turkey is a new entrant into the top 10 countries by FDI projects at the ninth position, replacing Finland. The remaining positions are taken by Spain, Belgium, Netherlands, Poland, Russia and Ireland.

The capability to restore economic growth, competitive edge, the ability to nurture new-age companies and commercialize ideas for changing the lives of millions are a few reasons why European cities attract FDI, with London at the number one position, followed by Paris and Berlin.

The top 10 includes three in Germany – Berlin, Frankfurt and Munich – as well as two cities in Spain – Barcelona and Madrid.

Central and Eastern Europe, Russia and Turkey account for more than half (52%) of Europe’s total jobs created by FDI – at 96,087 jobs – outpacing Western Europe. Slovakia is a new entrant into the top 10 countries by FDI jobs creation at the ninth position, replacing Serbia.

The top 10 also include the UK, Russia, Poland, France, Germany, Romania, Spain, Turkey and Ireland.

Key sectors for FDI in Europe

An economic recovery, a depreciating euro and falling energy prices have all helped revive the appeal of manufacturing in Europe. Taken together, they underpin a 20% surge in FDI manufacturing projects and jobs.

Logistics operations, also blue collar, rose 27%, driven by this industrial resurgence and a boom in e-commerce.

Services had a mixed year: software projects (27% increase), financial intermediation (37% increase) and back-office operations (15% increase) all grow strongly while business services (24% decrease) and research and development (1% decrease) slide.

The biggest investors

Although, European companies account for half (51%) of FDI projects into Europe itself and US multinationals a full quarter (25%), Chinese companies passed Japanese companies to become the fifth-largest FDI investors into Europe in 2014.

With 210 projects, up by almost 40% from a year ago, Chinese investment into Europe shows the effect of the Chinese Government promoting outward investment as a means to acquire technology, brands and resources overseas to boost domestic high-value manufacturing and services.

Source: News – EY – Western Europe overtakes China and North America as number 1 investment destination with FDI projects – EY – Global

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