Western Europe over­takes China, North Amer­ica in FDIs

Financial Mirror (Cyprus) - - FRONT PAGE -

For­eign di­rect in­vest­ments (FDI) into Europe hits a new record with $305 bln 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’s 13th Euro­pean at­trac­tive­ness sur­vey, Western Europe at­tracted 50% of in­vest­ments world­wide in 2014, up from 45% the pre­vi­ous year, over­tak­ing China as the most at­trac­tive in­vest­ment des­ti­na­tion, which saw a 6% de­cline in projects to 38%. An in­crease in North Amer­i­can in­vest­ment, up from 31% to 39%, placed it in sec­ond place and saw China pushed down to third place.

“The im­prove­ment in Europe’s rel­a­tive at­trac­tive­ness stems not just from eco­nomic sta­bil­i­sa­tion and re­cov­ery, but also from the greater un­cer­tainty about the emerg­ing mar­kets and their abil­ity to con­tinue de­liv­er­ing the growth rates achieved over the past decade,” said Marc Lher­mitte, EY’s Head of In­ter­na­tional Lo­ca­tion Ad­vi­sory Ser­vices.

“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,” Lher­mitte added.

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 ten 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 com­mer­cialise 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 ten coun­tries by FDI jobs cre­ation at the ninth po­si­tion, re­plac­ing Ser­bia.

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

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%) and back-of­fice oper­a­tions (+15%) all grow strongly while busi­ness ser­vices (24% de­crease) and re­search and de­vel­op­ment (-1%) slide.

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 fifth­largest 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.

The sur­vey re­veals 59% of in­vestors are con­fi­dent about Europe’s prospects in the up­com­ing three years, but only 32% of ex­ec­u­tives have plans to es­tab­lish or ex­pand oper­a­tions in Europe over the next year, while 64% do not have any plans.

For­eign in­vestors see bu­reau­cracy (20%) and slow eco­nomic growth (17%) as the big­gest flaws in Europe’s at­trac­tive­ness, over­shad­ow­ing the geopo­lit­i­cal un­cer­tainty at Europe’s fron­tiers (11%) and big deficits (11%). Euro­pean coun­tries need to fur­ther en­hance labour mar­ket flex­i­bil­ity, sim­plify reg­u­la­tions and foster busi­ness-friendly en­vi­ron­ments.

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