Foreign direct investment in Europe stalls amidst economic uncertainty

Foreign direct investment (FDI) into Europe stalled in 2022, rising only 1% compared with 2021, and remains 7% lower than in 2019, just before the COVID-19 pandemic hit, according to the annual EY European Attractiveness Survey 2023.

France, the UK and Germany continue to attract the bulk of FDI and retain the top three spots, accounting for around half of total projects. But in 2022 their performance was muted: FDI projects edged up 3% (1,259 projects) in France but were down 6% in the UK (929) and 1% in Germany (832).

Throughout 2022, businesses around the world announced 5,962 greenfield and expansion projects in 44 European countries, compared with 5,877 in 2021 – a year-on-year increase of just 1%, compared with 5% growth in 2021. Investment remains 10% lower than its peak in 2017.

The total number of jobs created in Europe as a result of foreign direct investments fell 16% year on year to 343,634. Responding companies cite economic issues of rising interest rates (45%), high inflation (40%) and soaring public debt levels (36%) as the three top risks impacting investment.

However, France’s larger volume of projects creates fewer jobs in total (38,102) and on average (33) than in the UK (46,779 total, 59 average), in part because of higher wage costs and more restrictive labor regulations.

Western Europe remains prime target

Mirroring the flat performance of the top three countries, the pace of investments also reduced in Spain (-10%) and Belgium (-4%). However, these countries had already rebounded strongly in 2021 after the worst of the COVID-19 pandemic.

On the other hand, Ireland (+21%) bucked the trend by recording a substantial increase, partly reflecting its agile, pro-business agenda and appeal to large US corporates.

One of the most striking features of the 2022 vs. 2021 data is the growth of foreign direct investment projects in several southern, central and eastern European states, including Italy (+17%), Poland (+23%), Portugal (+24%), Romania (+86%) and Turkey (+22%).

United States led foreign direct investment in the EU

According to Eurostat, the top ultimate investing economy in Europe in 2020 was that of the United States, making up a fourth of the total invested €752 billion (25.1% of the total value by ultimate investing economy).

SEE ALSO: M&A activity in 2020 in CEE at the lowest levels in the past 10 years

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