- Last Spring, EY published its yearly European Attractiveness barometer. This study showed that 9 out of 10 executives expected a decrease in investment plans for 2020 due to the impact of the coronavirus.
- Six months later, a new study launched by EY showed that foreign investors are more hopeful, despite the second lockdown.
- Belgium performed well and is ranked in the Top 5 of most attractive European countries, where 23% of respondents believed it will be amongst the most attractive countries for foreign investment in 2021.
How do foreign investors feel about the longer-term prospects for a post-Covid-19 Europe? To find out, EY interviewed 109 executives operating internationally across 14 sectors in October. These interviews show that although foreign investment is expected to fall sharply in 2020 and 2021 due to the uncertainty generated by the coronavirus crisis, they are more hopeful than in April around Europe's attractiveness for the next three years.
In October 2020, only 42% of internationally active executives expect a clear decrease in foreign investment projects in Europe, whereas in April 2020 this figure was 66%. Also in October, more executives believe that investments will either increase in 2020 (10% against 0% in April) or remain stable (17% against 11%). However, more companies say they are likely to postpone their planned investment projects in 2020 (32% against 23% in April).
Investor optimism does not stop here. Looking 36 months ahead, fewer companies anticipate volatility than during the first wave of the pandemic (55% in April compared to 41% in October). Moreover, a lot more companies expect normal activity to resume once economies recover (this almost doubles from 24% in April to 41% in October). However, only a slight decrease was measured in the number of pessimistic respondents who are expecting a fundamental negative change in the global business climate (21% in April to 17% in October).
Less relocation projects
This sentiment of return to “business as usual” is demonstrated by other indicators. In April, only 2% of the executives did not anticipate any changes in their supply chains. In October, this number was raised to a third of all participants. Moreover, this sentiment is also reflected in the number of companies considering relocation or local relocation which went down to 37% compared to 83% in April.
“It appears clear that many companies wish to avoid costly and disruptive reorganizations at this time. Asia is showing early signs of recovery, and multinationals will remain there for the time being. However, certain companies could repatriate some critical activities to Europe to mitigate the risk of future disruptions, but it will take time and incentives before these decisions generate massive investment in Europe,” says Tristan Dhondt, partner at EY Belgium.
Interestingly, far fewer foreign investors believe that national stimulus packages in itself will play a leading role in their future decisions. This is in stark contrast to the previous survey, measuring 32% in October, compared to 80% in April. Investors are now focused on ensuring safety at work, especially in sectors where employees are exposed to more risks.
Belgium still ranked in the Top 5
Countries with a strong and sizeable capital market for investment opportunities are the most attractive. This observation is corroborated by the fact that the three largest economies in Europe (Germany, France and the United Kingdom) are the most popular investment destinations.
It is worth noting that Belgium still performs well and is ranked 5th most attractive country for foreign investment in Europe in 2021, behind the strong trio of Germany, U.K. and France and behind Ireland, which is ranked 4th.
Find out more about the Attractiveness Survey.