14 Jun 2021

Foreign investment into Europe set to rebound in 2021, following 2020 downswing

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EY Malta

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While the turbulence and uncertainty caused by the COVID-19 pandemic resulted in foreign direct investment (FDI) in Europe falling by 13% in 2020, 40% of respondents plan to establish or expand operations in Europe in the next 12 months, compared with 27% at the start of the COVID-19 pandemic, according to the annual EY Europe Attractiveness Survey. These findings act as an interesting backdrop to seventeenth edition of the Malta Attractiveness Survey which is being currently conducted amongst the FDI community in Malta.

The EY Europe Attractiveness Survey is based on qualitative research conducted in March and April 2021 with 550 international decision-makers – from companies across a range of industries and headquartered around the globe, from small and medium-sized enterprises (SMEs) to multinationals – and quantitative analysis of FDI projects announced in Europe in 2020. The survey finds that for the first time, France, the UK and Germany are virtually tied as Europe’s most attractive investment destinations, attracting 985, 975 and 930 projects respectively, owing to investment in Germany falling less precipitously than in France and the UK, as a result of the COVID-19 pandemic.

Four key factors emerge from the survey as critical when investors decide where to invest:

  • Skills: The new role of technology triggered by the COVID-19 pandemic – in customer experience, more automated production lines and back offices, and “phygital” (physical and digital) work environments – means revamping Europe’s digital skills base is imperative. Eighty-two percent of respondents say the availability of a workforce with technology skills and 75% say countries with a 5G rollout plan are important factors in their choice of location.
  • Sustainability: Environmental sustainability will influence investors’ location decisions with 90% of respondents saying it is important to their investment strategy and 85% already consider Europe a “green leader”.
  • Stimulus: Foreign investors noted that national and European recovery plans are aimed at the long-term and deep-rooted transformation of economies and societies. Businesses also expect governments to provide short-term economic stimulus and help restart the European economy.
  • Simplification: Those doing business in Europe face a perfect storm of agreed changes and upcoming challenges. For example, changes in the tax environment will impact location strategies for investors as well as new digital business and environmental regulation and tax, which are to be defined.

Julie Teigland, EY EMEIA Area Managing Partner, said: “Business leaders around the globe are being propelled toward a paradigm shift, expedited by the COVID-19 pandemic. Success is beginning to be defined differently. The corporate world is entering the era of purpose-led growth, growth that is sustainable and delivers value that will benefit all stakeholders. FDI is one of the most impactful drivers of positive change in countries and for societies.

Ronald Attard, EY Malta Country Managing Partner, said: “Europe’s ability to recover strongly is going to be crucial for so many people’s livelihoods, but global companies outline several short and long-term risks. In the short-term new COVID-19 strains may cause more uncertainty and in the long-term, businesses are concerned about protectionism and uncertainty about tariff and trade policies that represent a greater threat to Europe’s attractiveness than they did in 2020. Respondents want European governments to simultaneously outline a clear, immediate path for the sustained safe reopening of public life and businesses as well as provide longer-term support for the recovery of European economies.”

Simon Barberi, EY Malta Attractiveness Program Lead, said: “These results are an interesting precursor to the Malta Attractiveness Survey results which come out later this year. European business leaders believe digital infrastructure and skills, and a robust sustainability agenda that considers the positive environmental impact of new projects, are critical in determining where they invest. It will be fascinating to see what the FDI community in Malta believe on these areas. We are looking forward to presenting the Malta Attractiveness survey results next October during Future Realised, a 4-day virtual experience with global and local experts as we analyse Malta’s FDI landscape and economy.”

Check out the full results of the 2021 European Attractiveness Survey and register for EY’s Malta Future Realised 2021 virtual event.