I am delighted to welcome you to the 2017 Nordics Attractiveness Report, which examines the evolving performance of the Nordics as a destination for foreign direct investment (FDI). Our evaluation of FDI in the Nordics is based on the EY European Investment Monitor (EIM), EY’s proprietary database, produced in collaboration with Oxford Intelligence. This database tracks those FDI projects that have resulted in the creation of new facilities and new jobs. By excluding portfolio investments and M&A, it shows the reality of investment by foreign companies across the Nordic countries.
As a part of EY’s wider attractiveness program, this report continues our long history of sponsoring research into cross-border trade, reflecting our desire to encourage an open dialogue between business leaders, investors and policy makers. In launching the Nordics Attractiveness Report for the first time this year, we hope to stimulate more focused discussions within the public and private sectors on how to maximize the Nordics’ economic performance.
We hope this report will help our readers better understand and recognize the Nordics’ economic successes, and to reinforce its foundations. As we continue this report over future years, we at EY look forward to contributing in that process.
Nordics Managing Partner
Markets and Accounts
EY’s Attractiveness Report 2017 - Nordics
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Nordics’ attractiveness in 2016: the reality
In assessing the overall performance of the Nordics in 2016 for attracting FDI, it has been a year of ups and downs.
In terms of the ups, the number of FDI projects initiated by foreign investors rebounded strongly and climbed to a record high 328, outperforming the growth experienced across Europe as a whole by as much as double. This is a great accomplishment and demonstrates the ability of the Nordics to attract and sustain appeal to foreign investors.
However, latest figures also reveal that this increase in projects has not led to the creation of more jobs, rather the contrary. Despite Europe as a whole witnessing an upsurge in FDI employment in 2016 – continuing a steady uptrend since 2013 – the Nordics saw employment fall by almost a third from the previous year. As a result, the Nordics’ market share of all FDI employment secured in Europe fell to its lowest figure in ten years. While this could be viewed as a cause for concern, it likely signals the evolving mix of projects secured, as well as shifts in the Nordic labor market away from large numbers of low-skilled workers to fewer, knowledge-intensive roles.
Nevertheless, the Nordics remains largely successful in attracting FDI, and has clear potential and opportunities to sustain that success going forward. Through its well-developed digital and logistical infrastructures, skilled labor forces and stable legal and regulatory environments, the Nordics is well positioned to capture the tremendous upside of business-orientated digital technologies. This is supported by recent findings of the European Commission’s Digital Economy and Society Index, which concluded that Nordic countries have the most advanced and competitive digital economies in Europe.
As the adoption of robotics, artificial intelligence and Internet of Things continues to permeate across all industries and activities, the Nordics must continue building on its strong digital position. As competition increases, the Nordic countries must intensify their focus on key growth sectors and nurture talent and innovation to remain the destination of choice for foreign investors.
The Nordics’ FDI performance in 2016
FDI in the Nordics reached new peaks in 2016…
Foreign direct investors announced an impressive 328 new projects in the Nordics in 2016, up 31% from the previous year. This growth was over double that witnessed across Europe, which rose 15% from 2015, and is the best growth recorded in the Nordics since 2011. While all Nordic countries saw an increase in the number of FDI projects initiated during 2016, Sweden experienced an extremely impressive upsurge, with 90 new projects launched, up 76% from 2015. This performance placed Sweden as the top growth performer by number of FDI projects among the top 20 European countries.
… as Finland remains top Nordic destination…
Finland continued its dominance as the leading Nordic country in securing FDI projects, with 133 projects initiated, up 27%. This means that Finland has now outperformed Denmark, Norway and Sweden for the fifth consecutive year in its ability to attract FDI projects. Finland’s strong performance also saw it placed as the 11th highest recipient of FDI projects across Europe, while Sweden and Denmark placed 15th and 18th respectively. Norway placed 28th, down one place in the European rankings from 2015.
…though FDI job creation has fallen
Nordic-wide results for job creation were down from 2015 figures, with employment generated through FDI resulting in 2,483 new jobs, down 27%. While the task of calculating FDI job creation accurately is a difficult one, these figures are in contrast to the rise in FDI jobs created across Europe in 2016, up 19% from the previous year. Additionally, the average Nordic FDI project only delivered eight jobs, down from 14 in 2015. This is in part due to the mix of projects secured and shifts in the labor market away from large numbers of low-skilled workers to fewer, highly skilled roles that deliver increased value to the economy. Manufacturing projects, which historically have created the most jobs per project in the Nordics, today form a smaller percentage of overall FDI employment.
USA remains the largest country investor…
As has been the case historically, American companies were responsible for the largest proportion of foreign direct investments into the Nordics in 2016. Investors from the US signaled continued faith in the Nordic market and initiated 51 projects, up 21% from the previous year. However, this resulted in the creation of 916 FDI related jobs, down 43% from 2015, despite US investors creating 14% more jobs across Europe than the previous year.
… while European investment becomes increasingly important…
While the US topped the country rankings for initiating new projects in the Nordics, the majority of foreign investment in 2016 arose from intra-European FDI flows. European companies collectively accounted for 69% of all FDI projects initiated in the Nordics, up from 66% the previous year. In comparison, European countries as a whole received just 55% of FDI inflows from European investors in 2016; a variance largely explained by greater investment from American, Japanese and Canadian companies. This reveals that the Nordic countries are more heavily reliant on European-originated FDI as a source of projects than Europe as a whole.
… as Chinese FDI into Nordics rebounds
Chinese investors renewed interest in the Nordics in 2016, launching 17 FDI projects, up 143% from the previous year. Of the 17 projects initiated by Chinese companies, Finland alone secured 53% of these. Chinese companies invested across a diverse range of sectors, though a third of all FDI projects were initiated within the electronics and construction sectors. Interest from investors in India, Russia and Japan in 2016 however waned, with these three countries collectively launching 12 FDI projects in the Nordics, down 43% from the previous year, with employment creation down 65%.
FDI by activity and sector: an ongoing digital transformation
In 2016, the Nordics attracted a record 221 sales and marketing offices, up 39% from 2015, outperforming the growth witnessed across Europe as a whole at 29%. Sales and marketing offices made up 67% of all FDI projects in 2016, up from 64% in 2015. In addition to the number of sales and marketing offices secured, the Nordics also outperformed European growth for the number of projects related to manufacturing plants and R&D centers, up 42% and 11% respectively. The number of logistics centers launched also rose, up 73%. Additionally, foreign investors initiated seven internet data centers in the Nordics, equaling the previous peak year of 2013.
The two leading FDI sectors of software and business services show the scale and breadth of the ongoing digital transformation witnessed in the Nordics. The software sector regained its position as the Nordics’ single biggest source of FDI in 2016, launching 55 projects, up 83%. This growth is roughly seven times that seen across Europe, and demonstrates the Nordics’ continued ability to attract significant investment in this key growth sector despite a fierce competitive landscape. Together software and business services account for 31% of Nordic FDI, a figure higher than Europe-wide figures where a quarter of FDI goes into software and business services.
Denmark rebounds positively from 2015, but slips within the Nordics in terms of attractiveness indicators
At a country level, figures show that Denmark secured 72 FDI projects in 2016, representing a 14% increase from 2015. However, this rate of growth underperformed against the Nordic average of 31%. In terms of market share, Denmark captured 22% of FDI projects initiated in 2016 in the Nordics, down 3% from the previous year. This performance saw Denmark slip to third position in the Nordics for number of FDI projects launched (behind Finland and Sweden) for the first time since 2011.
For the second year running, Denmark’s FDI employment numbers were the highest of all the Nordic countries in 2016, resulting in 999 new jobs. However, this represented a decrease of 50% from the previous year. This decline is largely explained by the smaller contribution of jobs created in the software sector (down 55%), where figures were boosted in 2015 by a large investment that created 900 jobs. In terms of market share, Denmark captured 40% market of Nordic-wide FDI employment, down from 59% in 2015.
An analysis of the countries of origin for FDI projects in 2016 reveals that the US, the UK and Sweden combined were responsible for initiating four out of every ten projects in Denmark. The US tops the country rankings with 13 FDI projects initiated in 2016 (down 13%), followed by the UK with 9 projects (up 13%) and Sweden in third place with 7 projects (up 40%). In terms of FDI job creation, US investors accounted for 54%, creating 916 jobs in 2016 (down 54%).
The most significant industry generating investment into Denmark in 2016 was finance and business services. This industry alone accounted for 44% of all FDI projects initiated and 53% of job creation. Within finance and business services, 32 FDI projects were initiated in 2016 (up 28%), creating 530 new jobs (down 50%).
In 2016, foreign investors viewed Denmark as the most attractive Nordic country for software projects, with 20 investments initiated, up from six projects in 2015. A significant factor here is likely to be Denmark’s building reputation as a unique innovation laboratory, helped through the clustering of large and recent investments made by global IT companies.
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Finland builds on its recent successes in attracting FDI with a record performance
Headline figures show that the total number of FDI projects secured by Finland in 2016 increased to 133 investments, representing an increase of 27% on projects recorded in 2015. Notably, the Uusimaa area in Finland - including the capital and its surroundings – ranked as the ninth highest metropole region for FDI projects across Europe, with 94 projects launched, up 45% from the previous year. Finland captured 41% of FDI projects initiated in the Nordics in 2016, down 1% from the previous year.
Finland’s performance in job creation ranked third of all the Nordic countries in 2016, with reported employment generated through FDI resulting in 700 new jobs. While this represented a decrease of 3% from the previous year, it demonstrates stable recovery from the low figures recorded in 2014. In securing 700 jobs, Finland achieved a 28% market share of Nordic-wide FDI employment, up from 21% in 2015.
An analysis of the countries of origin for FDI projects in 2016 reveal that Sweden, the US, Germany and China together were responsible for initiating a little over half of all projects initiated in Finland. Sweden tops the country rankings with 32 FDI projects initiated in 2016 (up 113%), followed by the US with 17 projects (up 6%) and Germany in third place with 12 projects (up 9%). Interest from Chinese investors rebounded in 2016, with nine projects launched, up from one in 2015. In terms of FDI job creation, US investors alone accounted for 45%, creating 312 jobs in 2016 (up 333%).
In 2016, the manufacturing and finance and business services industries generated the majority of foreign investment into Finland, with both recording peak years in terms of number of FDI projects launched. These two industries alone accounted for 77% of all FDI projects and 71% of job creation.
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Norway makes steady if not unspectacular progress with modest gains in projects and jobs
Figures from 2016 show that the total number of FDI projects secured by Norway increased to 33 investments, representing an increase of 6% from the previous year. In terms of market share, Norway captured 10% of the FDI projects initiated in the Nordics in 2016 (down from 12% in 2015). This means that the other Nordic countries have outperformed Norway since 2010 in securing FDI projects.
Norway’s performance in job creation growth was the highest of all the Nordic countries in 2016, with reported employment generated through FDI resulting in 67 new jobs. While this in part can be explained by better employment data coverage and reporting, it still represents a promising increase from the previous year and suggests a recovery is underway following a challenging 2015 in terms of FDI. In securing 67 new jobs, Norway achieved a 3% market share of Nordic-wide FDI employment.
An analysis of the countries of origin for FDI projects in 2016 reveals that the UK, Sweden and the US together were responsible for initiating 55% of all projects in Norway. The UK tops the country rankings with eight FDI projects initiated in 2016 (up 300%), followed in joint second position by Sweden with five projects (down 29%) and the US with five projects (up 67%). Even though Denmark was only the fourth highest investor in number of FDI projects into Norway, the country accounted for 46% of FDI job creation, creating 31 jobs in 2016.
For the first time since the financial crisis, manufacturing overtook finance and business services as the most significant industry generating investment into Norway in 2016. These two sectors alone accounted for 82% of all FDI projects and 88% of job creation.
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Sweden produces a spectacular performance in attracting foreign investment
In 2016, foreign direct investors launched a record 90 investments in Sweden. This represents an impressive growth of 76% over the number of projects recorded in 2015, and is the first increase since 2011. This rate of growth significantly outperformed Nordic growth, as well as outperforming every one of the top 20 destination countries by FDI projects in Europe. In terms of market share, Sweden captured 27% of FDI projects initiated in the Nordics in 2016, up from 20% the previous year.
Sweden’s performance in job creation growth was the second highest of the Nordic countries in 2016, with reported employment generated through FDI resulting in 717 new jobs. This represents an increase of 6% from the previous year. In securing 717 new jobs, Sweden achieved a 29% market share of Nordic-wide FDI employment, up from 20% in 2015.
An analysis of the countries of origin for FDI projects in 2016 reveals that the US, the UK, Germany, Denmark and Finland together were responsible for initiating 61% of all projects in Sweden. The US tops the country rankings with 16 FDI projects initiated in 2016 (up 100%), followed by the UK with 14 projects (down 367%) and Germany in third place with 9 projects (up 29%). In terms of FDI job creation, German investors alone accounted for 52%, creating 374 jobs in 2016, an increase in 364 jobs from the previous year.
The most significant industries generating investment into Sweden in 2016 were finance and business services and manufacturing. These two sectors alone accounted for 72% of all FDI projects and 66% of job creation. Within finance and business services, 38 FDI projects were initiated in 2016, up 65%, with 27 projects launched in manufacturing, up 59% from the previous year. The growth experienced in both these industries means that Sweden greatly outperformed both its Nordic counterparts as well as most European countries.
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