Foreign investment into Europe set to rebound

While the COVID-19 pandemic resulted in foreign direct investment (FDI) in Europe falling by 13 per cent in 2020, 40 per cent of respondents in the annual EY Europe Attractiveness Survey plan to establish or expand operations in Europe in the next 12 months.

The figure at the  the start of the COVID-19 pandemic was 27 per cent.

The survey finds that for the first time, France, the UK and Germany are virtually tied as Europe’s most attractive investment destinations, attracting 985, 975 and 930 projects respectively, owing to investment in Germany falling less precipitously than in France and the UK, as a result of the COVID-19 pandemic.

Four key factors emerge from the survey as critical when investors decide where to invest:

Skills: The new role of technology triggered by the COVID-19 pandemic – in customer experience, more automated production lines and back offices, and ‘phygital’ (physical and digital) work environments – means revamping Europe’s digital skills base is imperative. Eighty-two per cent of respondents say the availability of a workforce with technology skills and 75 per cent say countries with a 5G roll-out plan are important factors in their choice of location.

Sustainability: Environmental sustainability will influence investors’ location decisions with 90 per cent of respondents saying it is important to their investment strategy and 85 per cent already consider Europe a ‘green leader’.

Stimulus: Foreign investors noted that national and European recovery plans are aimed at the long-term and deep-rooted transformation of economies and societies. Businesses also expect governments to provide short-term economic stimulus and help restart the European economy.

Simplification: Those doing business in Europe face a perfect storm of agreed changes and upcoming challenges. For example, changes in the tax environment will impact location strategies for investors as well as new digital business and environmental regulation and tax, which are to be defined.

Julie Teigland, EY EMEIA area managing partner, said: “Business leaders around the globe are being propelled towards a paradigm shift, expedited by the COVID-19 pandemic. Success is beginning to be defined differently. The corporate world is entering the era of purpose-led growth, growth that is sustainable and delivers value that will benefit all stakeholders.”

Ronald Attard, EY Malta country managing partner, said: “Europe’s ability to recover strongly is going to be crucial for so many people’s livelihoods, but global companies outline several short and long-term risks. Respondents want European governments to simultaneously outline a clear, immediate path for the sustained safe reopening of public life and businesses as well as provide longer-term support for the recovery of European economies.”