- Digital sector FDI projects more than doubled from 510 to 1,227 in the last five years
- Seven European cities cited by investors in top 20 most attractive technology hubs globally
- A technology-skilled workforce is critical in determining investment location decisions
Europe’s technology sector is booming according to the EY European Attractiveness survey – Technology, with the number of new foreign direct investments (FDI) surging to a record high of 1,227 in 2018 (up 5% year-on-year). Overall, FDI projects more than doubled from 510 to 1,227 in the last five years. The survey also finds that digital is the top sector driving Europe’s future growth (39% of investors), followed by cleantech (25%) and energy and utilities (21%).
Andy Baldwin, EY EMEIA Area Managing Partner and EY Global Managing Partner – Client Services-elect, says:
“To maintain this level of investment momentum, Europe must fast-track its digital competitiveness. This means primarily investing in the digital skills of the future and creating the physical infrastructure that technology companies need, such as ultra-fast broadband connectivity. Europe is making strong progress, however, there is still some way to go in closing the technology skills gaps and in regulating the technology sector. If this can be achieved, Europe will attract more investment, create more jobs and enjoy economic prosperity.”
The map of tech-attractiveness
The UK attracted the majority of European digital sector FDI (288) in 2018, despite a 10% fall compared with the previous year. Germany and France were close followers, attracting 218 and 171 digital FDI projects respectively across the sector (+2% and -2% over the prior year). Ireland (72 projects) and Spain (70 projects) also feature among the top five digital sector destinations.
The survey finds that Europe is home to more than one-third of the global cities that are most likely to produce the next technology giant. Two of Europe’s cities rank in the global top 10 list of most attractive technology hubs: London and Berlin, coming in fourth and seventh place respectively, following San Francisco/wider Silicon Valley, Shanghai and Beijing. In Europe, investors identify London, Berlin, Paris, Stockholm and Amsterdam as the top five most attractive technology hubs.
Baldwin says: “The convergence of technologies, processes, data, assets and people is giving rise to innovation hubs across Europe. We are seeing major European cities luring people with in-demand, hot skills and these are benefiting the agriculture, manufacturing, financial services, health and transport industries, in particular. To compete with the vast sums invested by the US and China in technology, Europe needs to differentiate and fortify its competitiveness.”
Technology skills are helping drive investment decisions
Among the investors surveyed, 94% cite the availability of a workforce with technology skills either as “critically important” or “important” in determining where they invest. Investors also cite the quality of education and labor costs as other key investment location determinants.
Baldwin says: “The availability of digital skills is ranked as the most critical factor on growth prospects and profitability. Europe needs to see this as an opportunity and create the environment to attract highly-skilled digital talent. Right now, European businesses are particularly after people with skills in cybersecurity, big data and analytics, AI and robotics – which are in short supply and critical for digital transformation. Unless businesses assign their talent agenda the same priority as their digital transformation, they are at serious risk of quickly becoming obsolete.”
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About the survey
EY attractiveness surveys analyses the attractiveness of a particular region or country as an investment destination. The surveys are designed to help businesses make investment decisions and governments remove barriers to growth. A two-step methodology analyses both the reality and perception of FDI in the country or region.
The evaluation of the reality of FDI in Europe is based on the EY European Investment Monitor (EIM), the proprietary EY database, produced in collaboration with OCO. The field research was conducted by the CSA Institute in January and February 2019, based on a representative panel of 506 international decision-makers. ey.com/attractiveness