FDI IN THE EU

Source: EY European Investment Monitor (EIM), 2017

The UK, Germany and France are the top three European FDI destinations in 2016, capturing more than half (51%) of European FDI inflows and respectively recording 1,144, 1,063 and 779. Spain reinforced its fourth position (308), with Poland (256) rising one position in the FDI rankings, becoming the first country in Central Europe to enter the top five investment destinations. Of the top three destinations, France achieved the highest increase with 30% growth in FDI projects over the previous year, followed by Germany (12%) and the UK (7%). Germany, with 1,063 projects, strengthened its challenge to the UK’s longstanding European FDI leadership.

By number of FDI projects among the EU countries, Sweden, Italy and the Czech Republic are the top growth performers, with an increase of 76%, 62% and 57% respectively over the previous year. Only the Netherlands (-5%), Belgium (-5%) recorded negative growth overall, a slowdown compared to 2015 when they all registered positive growth.

FDI performance and job creation

Poland ranks second in terms of 2016 job creation (22,074), following the UK, which leads with 43,165 new jobs attributable to FDI projects.

In 2016, France and Romania join the ranks of the UK, Poland and Germany in each attributing more than 15,000 jobs to FDI projects.

Recording 1,310 FDI projects, US companies were Europe’s biggest investors, accounting for 22% of all European FDI projects in 2016. FDI projects from the US in 2016 grew by 10% over the previous year.

Chinese companies were more active in Europe in 2016, registering 297 FDI projects (25% more than the previous year) and creating 7,919 jobs. Two-thirds of projects generated by Chinese companies were borne out of sales and marketing, followed by manufacturing and R&D investments projects – 52 and 22 respectively.

Cities retain appeal

Greater London ranks as the leading urban area by number of FDI projects in 2016 –accounting for 40% of FDI projects in the UK. This achievement would place Greater London in the fourth place ahead of Spain and Poland. Greater London is followed by Greater Paris with 270 FDI projects. Germany’s Düsseldorf and Oberbayern (Munich) areas retained their third and fourth positions respectively, while Spain’s Cataluna (Barcelona) rose one position to fifth place, with year-on-year growth of 5%.

In terms of investor sentiment, London retained its position as the most attractive European city. However, its appeal markedly fell from 52% in 2015 to 32% in 2017. Paris and Berlin were ranked by investors as the second and third most appealing investment destinations – although their appeal has declined compared with the previous year in favor of other European cities, including Frankfurt, Munich and Amsterdam.

Sector breakdown

Software and business services sectors together accounted for a quarter of FDI projects last year, underpinning Europe’s digital transformation. Software was the biggest source of FDI into Europe in 2016, generating 780 projects – up 12%. Business services followed as the second most active sector for FDI with the number of projects soaring 47% in 2016. This was driven by strong activity in the UK, Germany, France and Spain. Ireland and The Netherlands also posted impressive growth of 343% and 133% respectively in business services FDI projects in 2016.

Europe’s manufacturing sector, which accounted for 29% of FDI projects (1,455) and 53% of FDI jobs in 2015, attracted 1,538 FDI projects in 2016 – up 6% year-on-year. The CEE region increasingly is positioning itself as the continent’s “workshop.” In 2016, CEE secured 755 projects, a 15% increase and an overall share of 49% of European manufacturing FDI projects – up from 45% in 2015.

Sales and marketing activities made up 46% of all FDI projects in 2016, up from 41% in 2015. Notably, companies originating FDI projects outside of Europe accounted for 45% of sales and marketing FDI projects.

TOP EU DESTINATION COUNTRIES BY FDI PROJECTS (2016)

1. United Kingdom
2. Germany
3. France
4. Spain
5. Poland
6. Netherlands
7. Belgium
8. Ireland
9. Finland
10. Romania
11. Czech Republic
12. Hungary
13. Sweden
14. Italy
15. Denmark
16. Slovakia
17. Portugal

TOP EU DESTINATION COUNTRIES BY FDI JOB CREATION (2017)

1. United Kingdom
2. Poland
3. Germany
4. Romania
5. France
6. Czech Republic
7. Spain
8. Hungary
9. Ireland
10. Slovakia
11. Austria
12. Bulgaria
13. Belgium
14. Italy