European attractiveness survey
2012 performance and 2013 prospects
Europe remains mired in an economic crisis characterized by debt, unemployment and poor growth. And there is little sign of a resolution.
However, this has not deterred investors, who continue to commit resources and create jobs in the continent. It may seem counterintuitive, but the numbers show that the continent pulled in more FDI projects and created more jobs in the first half of 2012 than it did in the same period last year.
This preview of our much-awaited 2013 European Attractiveness Survey encompasses the diversity of corporate projects that are being undertaken, along with the macroeconomic trends, industrial shifts and cost pressures that are affecting investment decisions.
FDI on the rise: sign of confidence?
The inflows of foreign investment into Europe cannot compensate for the jobs that have been lost due to restructuring or downsizing.
However, these new investments, which are often strategic or technology-intensive, are a sign of confidence in the continent and are also likely to be one of the pillars of its future growth.
Number of FDI projects in Europe
Number of jobs created by FDI projects in Europe
Acceptance of the “new normal”
Investors appear to have accepted the uncertainty and volatility in some European countries and industries as a “new normal,” while continuing to take into account the continent’s fundamental qualities:
- The biggest concentration of high-power consumers
- Diverse and productive labor skills
- An unmatched innovation climate
- Superior infrastructure
These factors have outweighed the continent’s economic woes and attracted a range of investors from inside and outside Europe.
Europe’s encouraging FDI performance in the first half of 2012 also reflects increasing attention from emerging global giants, especially China and India, as they attempt to move up the value chain and find a new type of growth.
“Five years on from the start of the financial crisis and its impact continues to reverberate across European borders. Policy-makers in Brussels and beyond are confronted by a multitude of challenges, not least the issue of how to help EU economies move forward at a time of intensifying global competition.
Being at the forefront of driving innovation and entrepreneurship is an important starting point. Foreign Direct Investment is most likely to occur in those regions which have been able to implement pockets of innovation — and governments have a key role to play in this process. The German Government, for example, has had a pivotal role in the development of Germany’s clean technology industry, whereas UK policy-makers have had similar success in helping the UK biotech businesses grow and develop.
Removing the excessive bureaucracy and red tape that hinders entrepreneurship is crucial. Reducing the time it takes to register a patent or set up a business are just two of the ways in which policy-makers can help. But it’s not just about government. Europe’s universities can also help foster a culture of entrepreneurship by encouraging the next generation to be innovative and open to the possibilities of starting their own businesses.”
Julie Linn Teigland
EY’s Accounts, Industries and Business Development Leader for Europe, Middle East, India and Africa
Innovation: the key to sustainable growth
The economic and financial crisis has taught us that, while we certainly need an economy that grows and provides jobs, that economy must also be resilient. We need an economy that generates sustainable growth, not growth fueled by debt, speculation and greed; an economy that can cope with shocks and challenges.
Resilience and competitiveness now come from generating knowledge and ideas, not from tangible assets. A recent European Commission survey of some of Europe's companies that invest the most in R&D, showed that they expect their investment in research and development to grow by an average of 4% annually over the period 2012 to 2014.
This figure shows the importance that business places on R&D as a key factor for growth and prosperity. In-house R&D is seen as the most relevant driver of innovation by the surveyed companies, followed by market research and related activities for new product introduction. This positive trend is essential for European competitiveness and we need to complement it with robust public investment in innovation.
When asked about the effects of policies and external factors on their innovation activities, surveyed companies highlighted the strong positive effects of fiscal incentives, national grants, EU financial support and public-private partnerships, both at national and EU level. In contrast, the time needed to obtain intellectual property rights protection and the costs of that protection were seen by many companies as key factors impacting negatively on their innovation activities.
The Commission is delivering what it has promised to make life easier for innovative companies, under our Innovation Union banner. This includes progress on the unitary patent, on venture capital, on public procurement and on standards. We have also proposed to increase EU-level funding significantly for researchers and businesses. Horizon 2020, our future research and innovation program, has a proposed budget of €80b over seven years, up from €55b in the current program. This would provide direct research grants for everything from blue-sky research to demonstrator projects. It would also leverage private funding to provide finance to innovative companies.
Discussions on the overall level of the next EU budget are now heating up, with EU Member States and the European Parliament involved. If there are cuts to the current proposal, Horizon 2020 is at risk of getting squeezed as supporters of agricultural subsidies and structural funds fight for their corner. We need researchers and especially innovative businesses to make the case for more research and innovation funding at the European level. Our companies are the main drivers in making the European economy more knowledge-based and smarter. Horizon 2020 will give them a further boost. It needs the support of us all.
European Commissioner for Research, Innovation and Science