The European Attractiveness Survey
It will come as no surprise that China is the most attractive country for investment but who would have thought that Poland and the Czech Republic would make it into the Top 10?Times they are a-changing and investors are clearly keeping all their...
It will come as no surprise that China is the most attractive country for investment but who would have thought that Poland and the Czech Republic would make it into the Top 10?
Times they are a-changing and investors are clearly keeping all their options open. These are among the many intriguing findings of the 5th Ernst and Young European Attractiveness Survey, released last week at the World Investment Conference at La Baule in France.
China gained seven percentage points since 2006, while the US lost eight percentage points to drop to second place with 33 per cent. India moved into third place with 26 per cent rating compared to 18 per cent last year, overtaking Germany, whose rating remained unchanged at 18 per cent.
The survey gives rise to considerable optimism for Europe as it shows that labour costs alone are unlikely to swing a deal. China may be associated China with cheap and plentiful labour but it is only part of the story: Only four per cent of investors cited it as the most attractive region for labour skills.
There is clearly also a bias across the regions. For example, Americans (55 per cent) pay attention to Western Europe, compared to 40 per cent of Asian ones. This trend holds true for most American investment: They are more open to other regions than other nationalities.
Of course, while Europe remains the most attractive region, this does not apply equally for all activities. It ranks well for headquarters, warehousing and logistics, and administrative and accounting back office work, but very low for production units and call centres. Indeed, for headquarters, European countries have taken eight of the top 10 preferences (the other two countries being the US and Japan), representing 64 per cent in all.
Services dominate the results, with software and business services accounting for over a quarter of FDI projects. Of course this has implications on job creation as a single industrial project creates three times as many jobs as a tertiary sector one.
Thankfully, manufacturing has not disappeared completely: It still accounts for 40 per cent of projects and 60 per cent of employment.
How deep are the roots placed in Europe? Luckily, quite deep. Three quarters said that they have no intention of re-locating outside Europe.
So where does investment go to in Europe and where does it come from? There too is a tale to tell.
The UK and France lead by the number of projects attracted, taking 35.4 per cent of all the projects. But the real surprise was Romania which stands in seventh place and showed the highest growth (63 per cent).
Of course, the number of projects is not the only indicator: How many jobs are created? Using this criterion, Poland comes out on top, with over 31,000 jobs created, and the UK in second place with 27,500. This is because Central and Eastern European projects create an average of 217 jobs compared to the Western European average of just 64. And where does the FDI come from? Believe it or not, within Europe. More than half of FDI flows are intra-European, compared to 30.2 per cent from the US and 11.7 per cent from Asia. Who should you look out for? Investments from - yes, from - the BRIC countries (Brazil, Russia, India and China) are up by 50 per cent since 2005 and India is now one of the top 10 investors, right alongside Canada.
Key findings
Europe's attractiveness for foreign investors declined in 2007, losing 13 points between 2006 and 2007. However, Europe still remains the most attractive global investment region.
China lies in second place as a region, just seven points behind Western Europe, and displacing Central and Eastern Europe. India has gained ground and now stands in fifth place.
The US has lost eight points. Fifty-six per cent of business leaders believe Europe will become more attractive over the next three years. However, while 71 per cent and 62 per cent respectively expressed optimism about Central and Eastern Europe, only 49 per cent thought Western Europe would improve, down three percentage points.
The factors that would improve its ranking are: Reforms for greater flexibility (47 per cent); simpler administrative procedures (44 per cent); and more support for innovation.
Europe attracted 3,531 foreign investments in 2006, compared with 3,065 projects in 2006, up 15 per cent.
Tertiary activities represented 60 per cent of international investments in Europe, compared with 48 per cent in 2004.
An average of 101 jobs were created per project.
When green is gold
Over two-thirds of respondents take the environmental performance record of the region into account when choosing a destination for their investment. Only nine per cent of those surveyed say it is not taken into consideration.
Why? Well, 44 per cent think that eco-industrial responsible strategies stimulate innovation and R&D, while 37 per cent think it will create jobs.
Times they are a-changing and investors are clearly keeping all their options open. These are among the many intriguing findings of the 5th Ernst and Young European Attractiveness Survey, released last week at the World Investment Conference at La Baule in France.
China gained seven percentage points since 2006, while the US lost eight percentage points to drop to second place with 33 per cent. India moved into third place with 26 per cent rating compared to 18 per cent last year, overtaking Germany, whose rating remained unchanged at 18 per cent.
The survey gives rise to considerable optimism for Europe as it shows that labour costs alone are unlikely to swing a deal. China may be associated China with cheap and plentiful labour but it is only part of the story: Only four per cent of investors cited it as the most attractive region for labour skills.
There is clearly also a bias across the regions. For example, Americans (55 per cent) pay attention to Western Europe, compared to 40 per cent of Asian ones. This trend holds true for most American investment: They are more open to other regions than other nationalities.
Of course, while Europe remains the most attractive region, this does not apply equally for all activities. It ranks well for headquarters, warehousing and logistics, and administrative and accounting back office work, but very low for production units and call centres. Indeed, for headquarters, European countries have taken eight of the top 10 preferences (the other two countries being the US and Japan), representing 64 per cent in all.
Services dominate the results, with software and business services accounting for over a quarter of FDI projects. Of course this has implications on job creation as a single industrial project creates three times as many jobs as a tertiary sector one.
Thankfully, manufacturing has not disappeared completely: It still accounts for 40 per cent of projects and 60 per cent of employment.
How deep are the roots placed in Europe? Luckily, quite deep. Three quarters said that they have no intention of re-locating outside Europe.
So where does investment go to in Europe and where does it come from? There too is a tale to tell.
The UK and France lead by the number of projects attracted, taking 35.4 per cent of all the projects. But the real surprise was Romania which stands in seventh place and showed the highest growth (63 per cent).
Of course, the number of projects is not the only indicator: How many jobs are created? Using this criterion, Poland comes out on top, with over 31,000 jobs created, and the UK in second place with 27,500. This is because Central and Eastern European projects create an average of 217 jobs compared to the Western European average of just 64. And where does the FDI come from? Believe it or not, within Europe. More than half of FDI flows are intra-European, compared to 30.2 per cent from the US and 11.7 per cent from Asia. Who should you look out for? Investments from - yes, from - the BRIC countries (Brazil, Russia, India and China) are up by 50 per cent since 2005 and India is now one of the top 10 investors, right alongside Canada.
Key findings
Europe's attractiveness for foreign investors declined in 2007, losing 13 points between 2006 and 2007. However, Europe still remains the most attractive global investment region.
China lies in second place as a region, just seven points behind Western Europe, and displacing Central and Eastern Europe. India has gained ground and now stands in fifth place.
The US has lost eight points. Fifty-six per cent of business leaders believe Europe will become more attractive over the next three years. However, while 71 per cent and 62 per cent respectively expressed optimism about Central and Eastern Europe, only 49 per cent thought Western Europe would improve, down three percentage points.
The factors that would improve its ranking are: Reforms for greater flexibility (47 per cent); simpler administrative procedures (44 per cent); and more support for innovation.
Europe attracted 3,531 foreign investments in 2006, compared with 3,065 projects in 2006, up 15 per cent.
Tertiary activities represented 60 per cent of international investments in Europe, compared with 48 per cent in 2004.
An average of 101 jobs were created per project.
When green is gold
Over two-thirds of respondents take the environmental performance record of the region into account when choosing a destination for their investment. Only nine per cent of those surveyed say it is not taken into consideration.
Why? Well, 44 per cent think that eco-industrial responsible strategies stimulate innovation and R&D, while 37 per cent think it will create jobs.