6 minute read 31 May 2022

Foreign investment in Belgium increased 8% in 2021, but remains below pre-COVID-19 levels.

6 main trends from the Belgian Attractiveness Survey 2022

Authors
Tristan Dhondt

EY Belgium Strategy and Transactions Partner; Strategy and Transactions Leader for EU institutions

Out-of-the-box thinker. Focused on financing,deal making, and quantification of decision processes. Take macro-economic views. Challenge existing strategies and the status quo.

Marie-Laure Moreau

EY Belgium Assurance Partner and Regional Managing Partner Wallonia

Passionate about entrepreneurship and growth. Dedicated wife and mother. Loves ski and golf and supporter of Standard de Liege.

6 minute read 31 May 2022
Related topics Attractiveness Digital Workforce Sustainability Global trade
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Foreign investment in Belgium increased 8% in 2021, but remains below pre-COVID-19 levels.

Belgium saw the number of foreign investment (FDI) rise faster than the European average in 2021, with a total of 245 investment projects. This is one of the main conclusions of the EY Belgian Attractiveness Survey 2022, an annual study conducted by EY that gauges the attractiveness of Belgium as a location for investment. 

The growth in FDI projects reflects a strong rise in activity by foreign investors in Belgium after the downturn that hit the Belgian economy in 2020, even though the number of projects stayed below the pre-pandemic level of 2019. 

1. With an increase of 8% in FDI projects Belgium outperforms European average

After the tumultuous COVID years of 2019 and 2020, Belgium saw the number of investment projects rise faster than the European average in 2021. Belgium recorded 245 projects, which generated 6,970 jobs in 2021. Like in previous years, Belgium’s FDI performance was mainly driven by new projects. Out of 245 projects, 80% of them were new.

Because a few countries recorded an even faster uptick in FDI, Belgium loses one spot on the European ranking. However, this is behind a top five that consists of far larger economies. On top of that, the 8% increase in FDI masks a much more robust growth in job creation of 37%.

2. Belgium reaffirms its position as an important logistics hub

Five key sectors were the drivers of FDI activity in Belgium throughout 2021, accounting for 60% of projects and 58% of jobs. The “big four” remain the same, though we do see some variations in the ranking. Transportation & Logistics reclaims the number one spot from Business Services, while the Pharmaceuticals sector slowed down a bit after a very busy year, allowing Software & IT Services to overtake it to claim the third spot.

When it comes to types of investment projects, it is worth noting the marked jump in logistics investments, claiming the top position with 65 projects. In 2020, this class of investments didn’t even make it into the top three. The former “champion”, Sales & Marketing, drops to the third position. Manufacturing held on to its second place.

Logistics has always been a pillar of Belgium’s attractiveness, and this is further reinforced by the general trend towards re- and nearshoring.
Tristan Dhondt
EY Belgium Strategy and Transactions Partner; Strategy and Transactions Leader for EU institutions

3. US reclaims position as largest investor in Belgium

The United States reaffirms its position as the main source of FDI projects in Belgium with a year-on-year growth in projects of 70%, after ceding the top spot to the UK in 2020 and ranking even below the Netherlands and last year’s surprise China.

China did not follow through in 2021. While remaining the largest emerging markets investor, the number of Chinese FDI projects almost halved. This was particularly felt in the Walloon Region, where China was the biggest investor in 2020. The UK, which managed to grow its number of projects in a post-Brexit world and despite the pandemic in 2020, kept a steady growth pace in 2021, securing the second position in the overall ranking.

4. Belgium closes gap with the rest of Europe in medium-term attractiveness

It is hard to assess the precise impact of the conflict in Ukraine on Belgium’s attractiveness, not in the least since most of the respondents to the Belgian Attractiveness survey were interviewed before the start of the hostilities. Nevertheless, this year’s study shows some clear opinions about the specific strengths and weaknesses of Belgium as a potential investment destination.

Looking at the evolution of Belgium’s attractiveness over the next three years, we see that Belgium is now much closer to the European average than last year. 54% of respondents expect Belgium’s attractiveness to improve slightly to significantly. Last year, that number was only 35%, with the majority of respondents predicting a status-quo.

Belgium's attractiveness

54%

of respondents believe that Belgium’s attractiveness will improve during the next three years.

5. Tax regime and political & administrative instability are the main risks

Despite shifts in their mutual ranking, Belgium can’t seem to shake the main risks to its attractiveness. Investors remain preoccupied by the tax regime, the instability of the political, regulatory and administrative climate, skills shortage and labor cost.

6. Quality and skills of the workforce are applauded, but no room for complacency

The quality of the Belgian workforce has always been a strong point of the economy. This is reflected in a new set of questions in the survey in which investors are asked about Belgium’s performance compared to the rest of Europe in a number of areas, like talent. Belgium clearly does well in the field of investment in digital skills. It remains clear, however, that continued efforts are needed to boost the presence of a number of specific high-tech skills to hold on to this strong position.

Belgium’s open and pragmatic nature, coupled with the internationally acclaimed multilingual workforce, makes it an attractive country for investors.
Marie-Laure Moreau
EY Belgium Assurance Partner and Regional Managing Partner Wallonia

Recommendations

These are the policy measures EY Belgium suggests to ensure the attractiveness of Belgium for foreign investors in the long term.

  • Pay more attention to the established companies

    • Embrace our current strong clusters around logistics and pharma/ biotech, as well as pulling out all the stops by putting digital skills and the European Green Deal at the forefront
    • Developing a dynamic, high-tech and innovative environment is essential to maintain our competitive position

  • Increase digitalization

    • Promote the teaching of digital skills
    • Invest in durable life-long learning, allowing employees to retrain and participate in the digital economy in the long term

  • Sustainable development

    • Focus on a dynamic ecosystem of technology and green tech companies
    • Simplify fiscal measures and introduce incentives to foster the adoption of new technologies
    • Encourage the development of clusters to promote best practices exchange, joint learning and technology transfer
    • A more stringent regulatory framework to boost the investments in the green projects and practices

  • A stable and reliable tax system

    • Further reduce the corporate rate to 20%
    • Decrease the labor cost by e.g. introducing a cap on social security contributions
    • Decrease overall personal income taxation to a level comparable to neighboring European countries
    • Lower withholding tax rates for interest, dividends and royalties to 10%
    • Simplification of both corporate and personal income tax regulations
    • Create a stable tax climate that ensures certainty over tax issues
    • Maintain, bolster and market existing R&D related tax measures
    • Invest in digitalization
    • Invest in an open, collaborative and ongoing dialogue between taxpayers and tax administration
    • Maintain and simplify the existing ruling procedures, trust and empower the ruling commission

  • Take care of talent

    • Analyze continuously the gap in full labor costs with the most important trade partners of Belgium and act on the analysis; closely monitor impact of index on total cost
    • Examine ways in which the cost of labor can be further reduced. A tax shift was announced to stimulate the working population, employers should get positively impacted
    • Modify labor law principles to facilitate night-& shift work, e-commerce and teleworking
    • Support employers to actively promote and assess the wellbeing of the workforce
    • Reduce tax burden for individuals on professional income
    • Increase employment driven tax incentives, with a correct and unified interpretation and application
    • Attract more talent abroad, applying new tax regime for expatriates, alignment between tax and social security positions and reduce immigration burdens
    • Stimulate alternative mobility
    • Focus on the digital transformation of employees, including supportive measures with respect to the new way of working (e.g. remote working, virtual, flexible) in a post-pandemic environment

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Summary

After the tumultuous COVID years of 2019 and 2020, this year’s Attractiveness Survey reflects a world that slowly recovers from the effects of the global pandemic. As the European numbers show, the recovery in 2021 has been gradual but real. Belgium outperforms the European average with an increase of 8% in FDI projects, with a total of 245 investment projects. Optimism about Belgium’s capacity to attract investments in the coming years has increased. Despite this positive trend, Belgium can’t seem to shake the main risks to its attractiveness.  

About this article

Authors
Tristan Dhondt

EY Belgium Strategy and Transactions Partner; Strategy and Transactions Leader for EU institutions

Out-of-the-box thinker. Focused on financing,deal making, and quantification of decision processes. Take macro-economic views. Challenge existing strategies and the status quo.

Marie-Laure Moreau

EY Belgium Assurance Partner and Regional Managing Partner Wallonia

Passionate about entrepreneurship and growth. Dedicated wife and mother. Loves ski and golf and supporter of Standard de Liege.

Related topics Attractiveness Digital Workforce Sustainability Global trade
Upvote