European attractiveness survey 2014

Europe in the global FDI market

A year of growth for international investment in Europe

  • Share

In 2013, global FDI inflows reached €1.13t (+11% compared with 2012). While developed economies attracted a historically low €433.7b share of investment globally, emerging markets pulled in 52% of inflows.

FDI inflows by major region

% share of global FDI inflows (value in € billion)

EY European attractiveness survey 2014 - FDI inflows by major region

A new and sustainable confidence in Europe emerges among the business community

Investors have ranked Western Europe (45%) as the most attractive FDI destination in the world, overtaking China (44%) for the first time since 2009. Europe has gained +9 points in its attractiveness quotient from last year and +20 points since 2012, when the economic turmoil was at its peak.

Western Europe’s attractiveness has increased for the last two years, gaining +12 points after it hit a historic low in 2012.

Divergence in the perception of individual countries

There is a growing divergence in the perceived attractiveness of different European countries.

Western Europe’s rise in global attractiveness is a direct result of positive performances in Germany and the UK. However, Western Europe’s improvement was partly offset by a decline in the attractiveness of countries such as France and Italy, both of which suffer of a lack of competitiveness, weak business confidence, and slow appetite for change.

In CEE (excluding Russia), Poland and the Czech Republic are losing out to economies in the East. Winners in this area are Turkey (+4 points) and Romania (+2 points). 

North America on an upward trajectory

Investors ranked North America as the third most attractive region globally, with an attractiveness score of 31%, up 2 points from our 2013 survey and up 10 points from 2012. North America’s progress toward regaining sustainable economic growth, as well as its technological dominance and new energy mix, are the main draw for investors. 

BRICs losing their magic touch

In this year’s survey, the cumulative attractiveness score of the BRIC countries declined by 15%.

Since 2012, Brazil and India’s perceived attractiveness score is getting down by 5 points and 4 points respectively, whereas China and Russia’s scores remain with no loss or gain.

Rapid economic growth in the BRICs in the previous few years overshadowed some of their structural imbalance. Capital flight, depreciating currencies and financial implosion are immediate concerns in these economies.

Europe meets investors’ needs

The prolonged economic crisis has affected investor’s appetites for risk, their location criteria have evolved over the last few years.

Key location factors

Factors that companies take into account when deciding on a location to establish operations

  2014 2012 2011
Stability and transparency of political, legal and regulatory environment 1 2 3
The country or region's domestic market 2 1 8
Potential productivity increase for their company 3 5 4
Labor costs 4 3 7
Transport and logistics infrastructure 5 4 1
Local labor skill level 6 6 6
Stability of social climate 7 7 5
Corporate taxation 8 8 9
Telecommunications infrastructure 9 10 2
Flexibility of labor legislation 10 9 10

Source: EY's 2014 European attractiveness survey (total respondents: 808).

  • 43% percent of respondents said that the stability and transparency of a market’s political, legal and regulatory environment is their main concern when deciding on where to invest.
  • Respondents ranked the size of the domestic market (37%) as the second most important attribute for choosing an investment location.
  • An increasing number of business leaders (26%) hope locations can achieve productivity-related gains because of reduced input costs as well as creativity and innovation.
  • Investors’ interest in labor costs has declined strikingly over the years (26%)

These location factors are also key differentiators for European markets.

  • Investors ranked stability and a predictable business environment (44%) as Europe’s most attractive feature. 
  • The continent also offers investors a large (31%) and rich consumer (20%) market to meet investment requirements.
  • Furthermore, the capacity of European markets for innovation (38%) and the quality of their labor forces (31%) ensures easy availability of technology and resources for companies to maximize their gains.