Businesses ranked the legislative framework for digital services and markets as the second greatest risk to Europe’s attractiveness, up from fourth place last year. This likely stems from uncertainty about the impact of the Digital Markets Act, which is designed to stimulate competition within Europe’s digital sector, and the Digital Services Act, which is a range of regulations that protect technology users from misinformation, cyber threats and market dominance.
Shifts in European environmental legislation and policies ranked as the fourth-greatest risk to Europe’s attractiveness. This is likely a result of fears that climate change policies will push up energy prices, which have already increased significantly in some European countries since the beginning of 2022.
Then of course there is the risk that a new vaccine-resistant COVID-19 variant could materialize. If this resulted in the scale of lockdowns in 2020 and corresponding decline in economic activity, then FDI could be materially impacted.
Europe remains an attractive long-term destination
Foreign investment levels in Europe started to recover in 2021, but the survey data indicates that this may be short-lived given the war in Ukraine.
Some 53% of businesses planned to establish or expand operations in Europe during the next year, a significant increase on 40% in 2021 and 27% in 2020. However, the timing of respondents’ answers – in other words, whether they replied before or after the war in Ukraine began – played a major role. Just 25% of those surveyed after 15 March said they planned to invest in Europe. If the appetite of those surveyed with full knowledge of the war truly represents business sentiment, then appetite to invest during the next 12 months is actually at a three-year low.