Press release

19 Jun 2020 Zurich, CH

Massive decline in foreign direct investment expected in Switzerland and Europe

Zurich, 19 June 2020. Last year Europe was able to assert itself as an attractive investment location and attract a total of 6,412 investment projects from foreign companies. That is one per cent more than in 2018 and the second highest level ever measured.

  • 2019 was another strong year for Europe as a location for investment – France rose to become the top investment location, followed by Great Britain and Germany
  • With 73 investment projects, Switzerland ranked 17th in the European ranking – just ahead of Austria
  • The coronavirus crisis is expected to reduce foreign direct investment by up to 50 per cent

Last year Europe was able to assert itself as an attractive investment location and attract a total of 6,412 investment projects from foreign companies. That is one per cent more than in 2018 and the second highest level ever measured. Relative to other countries, France came first for the first time, thanks to an increase of 17 per cent – ahead of the United Kingdom and Germany. Switzerland recorded strong growth of 20 per cent and ranks 17th in the European ranking with 73 projects (2018: ranked 21st). This is shown by the latest survey by the auditing and consulting firm EY on investment projects by foreign companies in Switzerland and Europe.

US companies invested the most

Across Europe, most new foreign investment projects were announced by US companies last year; German companies were once again the second most important investors in Europe. The 23 per cent increase in Chinese investment projects, which had slumped by 26 per cent in 2018, is notable. Swiss companies announced 258 foreign investment projects last year – twelve percent less than in 2018. Most of these were in France, Germany, Spain and the United Kingdom. 

New priorities are being set

In view of the current market uncertainty, the immense costs of the coronavirus crisis and its dramatic impact on many sectors, planned investment projects are currently undergoing a comprehensive review by many companies. However, EY estimates show that 65 per cent of the investment projects announced in 2019 have already been realised by foreign investors or are currently being implemented. Due to Covid-19, inflows of foreign direct investment are expected to fall by 35 to 50 per cent in the current year, although this decline can vary widely by country and sector.

"For the countries of Europe, this means that competition between them for foreign investment will continue to increase. In order to be successful, they must be prepared to the challenges that are currently evolving due to the coronavirus pandemic – including the redesign of supply chains, the introduction of innovative technologies and the development of new ways of processing customers," comments Fabian Denneborg, Partner and Head of Mergers & Acquisitions at EY in Switzerland.

States will be more active

While the private sector is currently winding down any expenditure that is not strictly necessarily, the state is gaining in importance as an actor, Denneborg adds. For the time being, there will be greater government commitment – at least in those countries, in which the governments have the necessary financial resources. First and foremost it is a question of state stimulus, but an intensified industrial policy and state infrastructure programmes are also likely. In the health sector, too, the state will play a greater role in the medium term, in order to prevent any observable gaps in supply from occurring in a future pandemic situation, Denneborg expects.

Is the coronavirus crisis strengthening Eastern Europe?

The southern European countries, in particular Spain, France and Portugal, have enjoyed particularly strong in favour from foreign investors in recent years: In 2019 the number of projects increased by 17 per cent in France, 55 per cent in Spain, and in Portugal investments have more than doubled. Italy also recorded a five per cent increase in investment projects and climbed from 14th to 12th place in the ranking.

However, it is precisely these countries that now face strong challenges. On the other hand, a strengthening of Eastern Europe can be expected, since most countries in this region have so far mastered the health consequences of Covid-19 relatively well, have a high degree of digitisation and a high standard of vocational training.

Contributing to strengthening networking within Europe

Not only Switzerland and Europe, but the whole world is facing major challenges in the face of the coronavirus pandemic. In order to gain new impetus for the strengthening of Switzerland and Europe and to promote the need for even greater networking between business, politics, science, society and the next generation, EY is committed to acting as a partner of the Europa Forum at Lucerne in Switzerland. "Covid-19 has shown us the importance of close and constructive cooperation between individual states during a major crisis that affects everyone. We are convinced that our commitment to the Europa Forum will make an important contribution to this," says André Bieri, Partner and Head of SMEs and Family Enterprises at EY in Switzerland and Liechtenstein. 

 

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