Despite current geopolitical and financial market volatility, investment plans into Europe over the next three years are strong, with 56% of global investors planning to grow their presence in Europe, according to the EY 2017 European attractiveness survey.

This contrasts with the findings from the EY survey conducted last May, which found that only 36% of European investors had a positive investment outlook for Europe.

Investors cited instability on the continent as their primary concern to future investment plans. However, Europe's talent, innovation capacity and large, integrated market and production system are still valued by global investors.

Of the 254 global investors surveyed, high volatility in currencies, commodities and capital markets was identified as the biggest risk to investment decisions in Europe (37%), while economic and political instability within the European Union (EU), excluding Brexit, (32%) and the impact of Brexit (28%) were identified as the second and third biggest risks respectively.

Andy Baldwin, EY Area Managing Partner – Europe, Middle East, India and Africa, says: “It is encouraging that the investors we are tracking continue to have strong investment appetite in Europe despite the instability and mixed geopolitical environment. However, investor patience is finite. Europe’s historical investor appeal was built on certainty and predictability. Europe is in danger of developing an emerging market ‘geopolitical risk profile’ without commensurate returns. For the foreseeable future, pure economic factors will vie alongside political considerations in influencing final investment decisions.”

Heightened geographic and political risks across Europe and the UK are prompting one in 10 companies with a presence in Europe to review their geographical footprint. However, the survey finds that the UK’s EU referendum result is a far bigger concern for foreign companies established in the UK (33%), compared with those that are not (15%). Companies not established in the UK cite geopolitical and wider EU instability (31%), coupled with the slowdown in trade flows (30%) as more urgent concerns.

Fourteen percent of foreign investors with a presence in the UK plan to change or relocate some of their European operations in the next three years should the UK leave the European single market. Overall, 11% plan to modify their UK presence in Europe following Brexit. Germany was identified as the preferred destination for those investors moving out of the UK (54%), followed by the Netherlands (33%) and France (8%).

More than 70% of foreign investors say they have already felt some impact following the UK's referendum on EU membership. These investors have seen an impact in at least one area of their business operations in Europe and have cited operating margins, cost of purchase and sales, in particular. Companies with a strong presence in the UK were hit the hardest, with 31% reporting an increase in purchase costs and the same percentage identifying operating margin pressures.