UK still tops European investment league - but East of England down on 2008


04-06-2010

The UK retained its position as the most attractive destination for inward investment in Europe in 2009, according to Ernst & Young’s latest European Attractiveness Survey published today.

The 8th annual report, which examines figures for international investments into Europe, new projects or expansions, revealed that Europe remained open for business in 2009.

Despite the economic downturn, the region still secured 3,303 investment announcements, down from 3,718 in 2008. The number of jobs created was 124,923, down from 148,333 in 2008, continuing a downward trend that began in 2004.

UK number one

Ernst & Young’s study analyses both actual inward investment over the last 12 months and attitudes of global investors regarding their plans over the short to medium terms.

Retaining its ranking as the most popular European location for Foreign Direct Investment (FDI), the UK attracted 678 investment projects in 2009 – just 1% less than in 2008. These projects produced 20,017 jobs, ranking the UK as the number one European location, with 16% of the total jobs created across Europe by FDI. The largest investor in the UK was the US (243 projects), followed by France (50), Germany (49) and India (38).

The UK’s continuing strength in financial services underpinned its receipt of 30% of business service projects, 36% of software projects and 27% of financial service projects in Western Europe. Together, these sectors secured 42% of the jobs created in the UK.

“When seen in the context of 12 months during which the European economy suffered a deep recession, the resilience of the UK in securing FDI is a remarkable economic success story,” comments James Close, Partner at Ernst & Young.

“The reason for the strong performance is not, however, the emergence of exciting new origins for investment or previously unforeseen sectors. In fact, the UK continues to achieve because of the strengths of London as a business and financial services centre, the underlying strengths of the UK in securing service sector investment and, crucially, the continuingly special corporate relationship between the UK and the US.

“Indeed, the principal reason why the UK is the leader in the attraction of FDI is that the UK is the location of choice in securing US investment, and the US is the main origin of FDI into Europe. Investment from BRIC economies are yet to emerge as major trends. This is perhaps not surprising as new streams for investment need to gain maturity before they internationalise.”

East of England down on 2008

  • 35 foreign direct investment projects located in the East of England in 2009, compared to 46 in 2008.
  • 12 projects located in Cambridgeshire, three in Norfolk and four in Suffolk.
  • The bulk of projects originated from investors in US, where 18 projects were derived from.
  • 18 of the investment projects came from businesses operating in manufacturing, and 13 came from businesses in finance and business services.

Drilling down to specifics, the bulk of projects came from businesses in software (6), business services (5), electronics (4), and pharmaceuticals (3).

European winners and losers

The largest European economies held up relatively well in terms of their ability to attract inward investment in 2009. In addition to the UK’s strong performance, project numbers in France, Italy and Germany were up 1%, 4% and 7% respectively. There were some other winners; Russia, Ukraine and Turkey bucked the trend of their neighbours in Eastern Europe by all posting increases in the number of projects in 2009.

Understandably, with a 4% decline in European GDP there were some big losers in 2009 as well. The Spanish and Irish economies that historically have had particular appeal to investors outside Europe were hit particularly hard in 2009 and it was not surprising their project numbers were down.

However, where the impact of the recession was most dramatic was in countries like Poland, Hungary, Romania and the Czech Republic where project numbers fell collectively by 40% as investors sought the stability of the larger Western economies.

There were also some dramatic shifts in where the projects into Europe originated from. The United States, which continues to account for roughly a quarter of all projects into Europe, saw a 16% decline in 2009. This contrasts with China, whose investments into Europe surged by nearly 30%, with project numbers increasing from 87 to 111.

2010 outlook: a modest improvement ahead?

As well as analysing project data for 2009, the European Attractiveness Survey looks at investment outlook by asking over 800 executives about their future intentions.

Although a high percentage of those asked (53%) said they would be likely to pause a while longer before committing to further investment in Europe, James Close explains the investment environment is showing signs of improvement from 12 months ago.

“We saw a definite acceleration in the fourth quarter of 2009 in project announcements as investors became more confident,” he says. “The current problems around the Euro notwithstanding, we expect that 2010 overall will show a modest pick-up in project numbers and at least a flat-lining in job creation numbers.” 
 

 

EY is a global leader in assurance, tax, transaction and advisory services. With over 400 employees in our Cambridge and Luton offices, our teams provide a range of services to a variety of sectors, including manufacturing, life sciences, consumer products and retail, technology, real estate and construction, health, and the public sector. The broad array of companies across the East allows us to bring real, relevant and key insights to our clients.

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