Europe: opportunities and optimism

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Although Europe continues to be impacted by the financial crisis, foreign investors remain optimistic about its future, says EY’s Marc Lhermitte.

Europe needs to behave as if it is itself an emerging market.

Europe is in the midst of its worst economic crisis. However, our recent European attractiveness survey has revealed some important chinks of light.

Europe remains the world’s leading destination for foreign direct investment (FDI). Business leaders are optimistic, with 38% planning to establish operations in Europe in 2014

Investments on the move

With 32% of investors ranking it as the best place to invest, Europe remains among the most attractive global regions and is the number one investment destination with 22% of all global FDI inflows.

In 2012, 3,800 investments decisions were made in Europe and these projects have brought approximately 170,000 jobs across 44 countries on the continent.

Intra-European investment remains the number one source of FDI in Europe. Rapid-growth economies are also the source of about 250 new deals and 12,000 new jobs.

Shaping Europe’s future

Survey respondents stress the role of four sectors as the engines of European growth in the coming years:

  • Information and Communication Technologies (31%)
  • Energy (28%)
  • Pharmaceuticals and biotech (23%)
  • Cleantech (20%)

Yet there is a long way to go before these turn into real investments. In 2012, the cleantech sector accounted for just 3% of FDI projects into Europe and biotech for 2%.

Our survey showed that Europe needs to find new ways of delivering a high-quality proposition at a better price. Innovation ranks high on Europe’s policy agenda, but foreign investors suggest Europe must become more competitive, more disciplined and more flexible. It also needs new global hot spots.

Our survey also says there are local solutions that governments haven’t been able to create or implement at the national or European levels.

With investors insisting they need more support for high-tech industries and innovation, Europe’s policy-makers also need to educate, and to invest in skills and talent. At the same time, business needs to become even more entrepreneurial, with a better backing for small and medium-sized enterprises.

Europe needs to behave as if it is itself an emerging market. Foreign investors see its opportunities, but have expectations. Europe needs to step up to meet these expectations for a more prosperous future to emerge.

Read our article: Confidence undimmed