FDI into Europe hits a new record with $305 billion attracted into the region in 2014, translating to a 36 per cent year-on-year growth and 185,583 jobs (+12 per cent) despite global growth slowdown.
According to 808 decision-makers polled for EY’s 13th European attractiveness survey, western Europe attracted half of investments worldwide in 2014, overtaking China as the most attractive investment destination.
Marc Lhermitte, EY’s head of international location advisory services and author of the report, said: “The improvement in Europe’s relative attractiveness stems not just from economic stabilisation 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 200,000 new jobs created across the continent which is a very encouraging figure as employment is one of the key drivers of economic growth.”
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 per cent surge in FDI manufacturing projects and jobs. Logistics operations, also blue collar, rose by 27 per cent, driven by this industrial resurgence and a boom in e-commerce. Software projects (27 per cent increase), financial intermediation (37 per cent increase) and back-office operations (15 per cent increase) also registered growth.
European companies account for 51 per cent of FDI projects in Europe itself while US multinationals come in at 25 per cent. Chinese companies were the fifth-largest FDI investors into Europe in 2014.
With 210 projects, up by almost 40 per cent 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.
The survey reveals that 59 per cent of investors are confident about Europe’s prospects in the next three years, but only 32 per cent of executives have plans to establish or expand operations in Europe over the next year. Sixty-four per cent do not have any plans.
Foreign investors see bureaucracy (20 per cent) and slow economic growth (17 per cent) as the biggest flaws in Europe’s attractiveness, overshadowing the geopolitical uncertainty at Europe’s frontiers (11 per cent) and big deficits (11 per cent).
European countries need to further enhance labour market flexibility, simplify regulations and foster business-friendly environments.
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