6 key insights from the Belgian Attractiveness Survey 2021

Cleantech and industrial high-tech are seen as the business sectors that will drive Belgium’s growth in the coming years.

Despite the turbulence caused by the pandemic, Belgium maintained its fifth position in the ranking of European countries for foreign direct investment (FDI). That is the main conclusion of the EY Belgian Attractiveness Survey 2021, an annual study conducted by EY that gauges the attractiveness of Belgium as a location for investment.

There is cause for vigilance, though, as Belgium lags the average European prospects for recovery. There are green shoots in the sector of cleantech and industrial high-tech, while targeted efforts to increase its digital skills can further elevate the attractiveness of our country as investment location.

1. Belgium holds on to its position in the top 5 of European countries that attract the most foreign investment

It is no surprise that the COVID-19 crisis had an impact on the number of investment projects in Belgium. All in all, Belgium recorded 227 projects, which generated 5,098 jobs in 2020. That means COVID-19 pushed the number of projects down by 15% compared to 2019, which is slightly more than the European average of a 13% drop. With this result, Belgium holds on to fifth place in European ranking for foreign direct investment (FDI) in 2020.

2. Optimism about COVID-19-recovery boosts short-term investment plans

COVID-19 will also claim a major role in 2021, but more likely in a positive sense. It appears that investment plans were merely delayed and not cancelled last year. This is reflected by the fact that 66% of respondents replied positively when asked if they had plans to establish or expand operations in Belgium in the coming year, compared to 10% last year.

Though investors expect that the attractiveness of Belgium for investments will pick up after the COVID-19 crisis, these expectations are considerably more modest in the long term. Whereas 62% expect that the attractiveness of Europe will increase slightly to significantly over the next three years, only 35% expect a comparable uptick for Belgium.

3. Business services remains most important sector for FDI in Belgium, pharmaceutical jump

As in previous years, 4 key sectors accounted for more than half of the investment projects in 2020. But the composition of this top-4 reflects the global race for cures, treatments and finally vaccines against the coronavirus. Pharmaceuticals jumped from the ninth position in 2019 to third place in 2020, accounting for 22 projects. With this, the pharmaceutical industry pushed the agri-food business out the top list, and landed in front of the digital sector.

Three activities account for more than half of all FDI projects in 2020: sales and marketing (53), manufacturing (44) and business services (43). The number of headquarter projects rebounded to 15 after a drop to 5 in 2019.

4. UK confirms rising trend and becomes biggest investor in Belgium

The UK, in a post-Brexit reality, maintained its level of investment projects in Belgium despite the COVID-19 crisis. Because other big investors like the USA and France drastically scaled back the number of projects, the country became Belgium’s main source of FDI. China almost doubled its investment projects in our country in 2020.

5. Investors appreciate Belgian entrepreneurial culture and quality of labor force, tax regime is the main concern

When we take a look at the reasons why Belgium is attractive for investors, we see that the quality of the labor force remains Belgium’s most important asset. Together with the entrepreneurial culture, it is the main factor that positively influences investment decisions in Belgium.

The main risks for Belgium’s attractiveness have consistently been the level and complexity of its taxation, the cost of labor and political, regulatory and administrative stability. But this “top three” has been shaken up drastically. The level and complexity of taxation has now jumped to the top of the list of risks to Belgium’s attractiveness.

6. Cleantech confirms its status as the main engine for growth

Cleantech and renewables firmly establishes itself as the main sector that will contribute to the future growth of FDI in Belgium. This trend became apparent last year, when a third of respondents highlighted these industries as a major growth prospect. The EU Green Deal plays a big part in this, but also the general quest for carbon neutral and otherwise sustainable technologies and business models has become an unstoppable force.

Recommendations

With all this in mind, EY has the following recommendations for all relevant stakeholders: