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Europe's inward foreign investment grows, but more slowly

Foreign direct investment (FDI) is part of Europe’s economic lifeblood.

In 2017, foreign investors made more than 6,500 decisions to invest in the 50 countries of greater Europe. They made plain their assessment of the region’s attractiveness by investing in plants, back-offices, headquarters, R&D centers and other assets across the continent.

Their decisions, become a cartography of confidence. They provide a demonstration of the forces deciding which cities, regions and countries will prosper – and which will stagnate.

EY’s Europe Attractiveness Survey has been tracking these investment decisions since 2000. This year it reveals an inflexion four powerful undercurrents of change. We think these are true game changers because sweeping in from different directions, they are remaking the European rulebook on cross-border investment.

The reality of foreign investment in Europe in 2017

• Europe secured 6,653 FDI projects, up 10%, creating 353,469 jobs
• The UK leads though Brexit fears bite, Germany is a close second and FDI into France surges
• FDI into CEE slows, as investors look further south and east
• Investors’ confidence in Europe remains high
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The number of foreign investment projects in Europe increased by 10% in 2017
Economic recovery has lifted demand within Europe, whilst growth elsewhere has bolstered demand for its exports. FDI has been spurred by tightening capacity and product renewal, and facilitated by low interest rates.

Europe is resilient among global and regional tensions
The business leaders we surveyed in February 2018 continue to highlight Europe as the world’s most attractive region for foreign investment.

The European economy has been growing at its fastest rate for a decade.

Spending by European consumers has been resilient despite higher inflation in 2017, underpinned by strong employment growth. Europe’s Economic Sentiment Indicator remains above its long-term average and lending has been growing.

According to the April 2018 edition of EY Global Capital Confidence Barometer, Western Europe – along with the US – has become a destination choice for companies looking to acquire innovative assets and more customers, even as they shrug off worries over protectionism and new rules governing cross-border dealmaking.

The European foreign investment map is changing
Europe’s three largest economies, Germany, France and the UK, each secured more than 1,000 projects and together almost 50% of all FDI projects.

The UK is feeling the effects of Brexit. It remains the top destination for FDI in 2017, attracting 1,205 projects. That was only 6% more than it attracted in 2016, a slowdown after very strong growth in earlier years.

Germany continues to challenge the UK, but strong growth in project numbers recorded in recent years has slowed.

France enjoyed surging project numbers (+31%) and has now become a direct competitor to Germany and the UK across the project spectrum.

A re-shuffle in country rankings show investment shifting further east

More information on EY’s Europe Attractiveness Survey here