2013 European attractiveness survey

Investment varies across Europe

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In 2012, geographic differences in Europe were stark and surprising. Four distinct stories stand out.

1. Competition at the top: The UK remained the most successful country in Europe at attracting FDI in 2012. But Germany’s share of inbound European FDI projects continues to increase, and reached 16.4% last year, narrowly behind the UK’s 18.4% share.

After overtaking the UK in manufacturing sectors, such as machinery and equipment, electronics, scientific instruments, chemicals and electrical during 2011, Germany is now catching up in sectors driven by services.

2. Re-emergence of CEE: CEE regained traction as an FDI destination in 2012 after two disappointing years. Though the number of investment decisions slipped 4.8% on the year, the region secured a remarkable 26.1% more jobs.

That meant that CEE overtook Western Europe to become the leading recipient of FDI jobs in Europe.

Companies from both Europe and beyond are increasingly expanding their manufacturing capacity in CEE or moving their factories there. Carmaker Renault SA, for example, has adopted a low-cost strategy and is setting up factories in Morocco, Slovenia, Turkey and Romania. It now makes only a quarter of its cars in France, its home country.

CEE is reaping the benefits of an affordable and capable labor force and its cost base remains competitive compared with Western Europe. According to the Organisation for Economic Co-operation and Development, annual wages in CEE countries, including Poland, Hungary and the Czech Republic remained, on average, half of those in Germany, France or the UK.

3. Western Europe: high performers: Spain, Belgium, Ireland and Finland each attracted more FDI projects in 2012 than the previous year. Against a weak economic backdrop — Irish GDP rose an estimated 0.6%, but output fell by 1.4% in Spain and by 0.2% in both Belgium and Finland — Spain, Ireland and Finland drew record numbers of projects and Belgium had its best year since 2008. The resulting decline in relative unit labor costs has enhanced the competitiveness of goods and services produced in these peripheral economies.

4. Room for improvement: In 2012, a second group of Western European countries attracted fewer projects and relatively few jobs. This includes France, the Netherlands, Italy and Switzerland. Nevertheless, these four economies together netted more than 750 FDI projects, 20% of the 2012 total.