Press release

31 May 2022

Direct Investment in Europe: The economy is recovering slowly from the pandemic – Switzerland remains attractive

Zurich, May 31 2022 – Switzerland remains a popular location for investors: With a total of 75 direct investments made in 2021, it ranks 16th overall in Europe. Despite a slight decline in relation to the size of the country, this is a very good ranking. Switzer-land ranked 14th in 2020 and 17th in 2019. This is shown by the audit and consulting firm EY’s latest study of investment projects by foreign companies in Europe.

  • Switzerland remains attractive with 75 foreign investments in 2021 – holding 16th place among the top locations in Europe
  • In turn, Swiss companies are making almost 240 investments in European countries
  • Direct investment in Europe increased by 5 percent in 2021 – the economy is slowly recovering from the pandemic

Switzerland remains a popular location for investors: With a total of 75 direct investments made in 2021, it ranks 16th overall in Europe. Despite a slight decline in relation to the size of the country, this is a very good ranking. Switzerland ranked 14th in 2020 and 17th in 2019. This is shown by the audit and consulting firm EY’s latest study of investment projects by foreign companies in Europe.

André Bieri, Markets Leader at EY in Switzerland stated: "Switzerland remains a stable and safe hub for investments from America and Asia for expansion into Europe." For Bieri, the advantages of Switzerland as an investment location are obvious: "Innovation, a central location, political stability and a well-trained workforce combined with a good tax policy for legal entities and individuals are the keys to success in this regard." However, the OECD's global tax programs have consequences for investments from neighboring countries. "In future, investments will probably no longer be made in Switzerland with the sole aim of optimizing taxes."

The EY study examines 44 countries in Europe and reveals that a total of 5,877 direct investments were made in 2021. This represents an increase of five percent compared to the previous year (5,578). The top five most attractive investment locations in Europe in 2021 are France with 1,222 investments, the UK (993), Germany (841), Spain (361) and Turkey (264).

However, the changes varied greatly depending on the industry and country. Investment boomed in some countries and sectors, while in others development was rather weak.

When viewed over a longer period, the data collected also shows that the economy has not yet recovered fully from the effects of the pandemic: Although there has been a recovery in GDP growth, direct investment has not yet reached pre-pandemic levels. In each of the years from 2017 to 2019, the number of direct investments in Europe was well above the 6000 mark. A direct comparison between the number of investments in the record year 2017 (6,653 investments) and 2021 shows a difference of 12 percent.

Swiss Investment in Europe

In terms of investments made in other European countries, Switzerland performed very well in 2021: With 238 Swiss investments, it ranks seventh, making it one of the top investors in Europe. Swiss investments are mainly made in the large economies: These were primarily in France, with 70 investments in 2021. Germany was in second place with 48 and the United Kingdom was in third place with 23 investments. These were followed by Portugal (13), Spain (11), Italy (10), Serbia and Austria, with 7 Swiss investment projects in each of the last two countries.

The USA leads investment in Europe

As in previous years, most investors came from the USA – which made 1,167 investments in European countries last year. There were 661 investments from Germany, 447 from the UK, and French direct investments in other European countries numbered 298. Other countries in the top ten were the Netherlands (267), China (259), Italy (203), Japan (172) and Sweden (167).

Switzerland as a location – USA and China invest more

In 2021, the USA was the most important foreign investor in Switzerland. With 24 of the total 75 investments, almost one third were made by US players – in 2020, 19 US investments were recorded. Germany is in second place in this ranking with 14 investments – in 2020, the figure was 27. With this decline, German investments in Switzerland are leveling off at the 2018 level.

In contrast, investments from the UK (ranked third) increased from seven in 2020 to nine last year. An increase has also been recorded for investments made by China in Switzerland: In 2020, only one was registered; last year, there were five Chinese investments. The number of French investments has decreased from eight in 2020 to four in 2021.

The most attractive Swiss industries for investors

Switzerland, and Zurich in particular, have developed well in the field of Internet technology in recent years. In 2021, there were again 18 direct investments in Swiss companies in the software and IT services sector. Michael Messerli, Head of Strategy and Transactions at EY in Switzerland explained this situation: "Even before Covid, the trend was towards increased investments in the IT, Internet and software sectors because high growth rates are generally expected there. After some reticence in 2020 during the early days of the pandemic, the field has attracted a lot of attention in 2021."

Foreign companies from the pharmaceutical, life sciences and biotech industries have invested in the Basel and Zug regions as well as in the French-speaking part of Switzerland, and 15 investments were made in this sector last year. This is followed by the financial and service sectors with 14 and 12 investments respectively. There has been a significant decline in the latter, with 19 investments in service companies registered in 2020. "Compared to the IT sector, the pandemic had the opposite effect on the service sector," Messerli stated. The best-known companies in which investments have been made in Switzerland include Google, Zalando, Lidl, Decathlon, DHL and Bank of China.

Investment plans in Europe and the consequences of the global political situation

In 2022, plans for investment in Europe nearly doubled from 2020 levels, reflecting the region's recovery and the confidence of international investors. In 2021, corporate plans were already at their highest level since the financial crisis. This does not so much reflect an enthusiastic perception of Europe, but stems from the need for companies to reduce the vulnerability and dependence of supply chains and mitigate the rising cost of long-distance freight.

The conflict in Ukraine could affect the original investment plans for 2022. Seventy-nine percent of companies surveyed before March 1 planned to invest in Europe in the coming year. For those surveyed after March 1, this percentage drops to 48 percent.

Europe's attractiveness in 2022 is significantly lower, but it still leads the world. The long-term outlook for Europe appear encouraging: When asked which regions were most attractive for investment, 60 percent of the companies surveyed answered "Western Europe". 43 percent of them specified "Central and Eastern Europe". Even if the results are lower than in 2021 (81 and 47 percent, respectively), Europe is expected to be the most attractive location for foreign investment.

"At the same time, the new geopolitical and economic environment that has emerged, particularly with the war in Ukraine, means that Europe's immediate attractiveness for investment may be in doubt," Messerli continued. However, Europe's long-term attractiveness remains robust: Sixty-four percent of investors surveyed before March 1, 2022 believe Europe's attractiveness will improve over the next three years.

The pandemic and war are impacting on supply chains and investments

"The ongoing pandemic and the war in Ukraine are events that will increasingly lead to a restructuring of international supply chains and business models towards sustainability, which will also have consequences for investments," forecast André Bieri. "The cost-optimized global supply chains established in the past are proving to be less resilient than expected. As a consequence, the focus is now shifting back to the European home market – including as a manufacturing location."

Manufacturing, logistics and R&D projects increased by 22 percent in 2021, partly due to supply chain restructuring which is expected to continue.

In the company survey, 53 percent of managers in Europe said they were redesigning their supply chains to move production closer to their marketplace – only 23 percent of companies had such plans a year ago.

Forty-three percent of companies intend to shift operations back to their home market, up from 20 percent a year ago.

"In the coming years, European companies will increasingly invest in Europe again. On the one hand, investments are likely to be made in the areas of production and logistics, which will be to the advantage of Europe as an industrial location," said Bieri, adding: "The replacement of oil and gas will result in increased investment in green energy projects in Europe."

"The global division of labor was very cost effective. Regionalizing these global processes will lead to significantly higher costs for companies," stated Bieri. These will probably have to be passed on in large part to buyers and customers. But other factors are also leading to rising costs: "Based on inflation rates, a general increase in costs can already be seen. The reasons are the ongoing difficulties with supply chains, production in former low-wage countries and, above all, energy costs for transportation." Thus, European production locations have become attractive again, especially in combination with increased digitalization and automation of production.

About the study

The EY study records investment projects that lead to the creation of new locations and new jobs in Europe. 500 decision-makers at internationally active companies were surveyed for the study. The study is based on data from the EY European Investment Monitor (EIM). The monitor covers investment projects that have led to the creation of new sites and/or new jobs. Portfolio investments and mergers and acquisitions have not been included. The study is conducted and published annually.