The year 2020 was a year of shock, volatility and change, both within Europe and beyond: a global pandemic, a new US President, a trade deal between the EU and the UK, double-digit GDP declines, more than 12 million European job losses and a massive and unprecedented stimulus package to rescue Europe’s economy.
> This is not exactly the stability that investors crave, EY wrote. But, despite the unprecedented circumstances, foreign investment in Europe only declined by 13% in 2020 and is expected to rebound swiftly. And although investment was down overall, some areas actually fared very well.
For example, investment in the life sciences sector surged 62%, and the number of logistics projects increased 11%.
Amid the volatility, investment in Europe is relatively resilient because it is perceived to be a stable environment that has the fundamentals that investors need: an abundant supply of skilled labor, robust infrastructure, political stability and a large addressable market, EY says.
But Europe cannot be complacent. COVID-19 has elevated the importance of a number of factors that influence location decisions. Take skills, for example. Businesses have always located their operations in areas where there is an abundance of talented workers.
But the COVID-19 crisis has accelerated businesses’ digital strategies and, as a consequence, their need for digital competencies. In addition, the 2021 Europe Attractiveness survey’s data reveals that 9 in 10 businesses consider environmental sustainability to be an important factor that determines their investment strategy.
Businesses from around the world announced 5,578 Foreign Direct Investment (FDI) projects in Europe in 2020, a 13% decline from 2019.
This is the first time that foreign investment posted a double-digit year-on-year percentage decrease since 2009, when the global financial crisis triggered an 11% fall.
Last year’s drop needs no explanation. The onset of the COVID-19 pandemic at the beginning of the year stopped investment plans in their tracks and created immense economic uncertainty.
Due to Germany’s relative success in containing COVID-19 during 2020, its investment fell less precipitously than in France and the UK, leaving the three countries virtually tied as Europe’s top investment destinations. France attracted 985 projects, the UK 975 and Germany 930.
Looking by sector, life sciences was the only major industry that experienced an increase in foreign investment, as businesses rapidly moved to meet the surging demand for COVID-19 vaccines, treatments and personal protective equipment. ■