FDI in Europe Drops for First Time Since 2020, Report

Ernst & Young’s 23rd Europe Attractiveness Survey has revealed a notable downturn in foreign direct investment (FDI) into Europe, marking the first decline since 2020. The report underscores various factors contributing to this decline, including sluggish economic growth, surging inflation, escalating energy prices, and a volatile geopolitical environment.

Despite the overall decrease in investment projects, Europe continues to be viewed as an attractive destination for long-term investment opportunities. However, Ernst & Young emphasises the presence of “clear risks on the horizon,” urging urgent action to address investor concerns and bolster Europe’s future attractiveness.

France emerged as the top destination for investment, despite experiencing a 5% annual decline in the number of projects. Meanwhile, the United Kingdom secured the second position, with a notable 6% increase in investment projects. Germany, however, witnessed a 12% decline in investment, ranking third among the largest economies in Europe.

The report highlights significant investment opportunities in Southern and Eastern European countries, driven by businesses reorganising supply chains and reshoring production activities. Countries such as Spain, Turkey, Poland, and Italy saw an uptick in manufacturing projects, signalling a shift in investment patterns across the continent.

However, the impact of Russia’s war in Ukraine reverberated across markets bordering the conflict zone, leading to declines in investment in countries like Romania, Finland, and the Baltic states. Despite its proximity to Ukraine, Hungary experienced a surge in investment, particularly in the transport sector.

Amidst these challenges, Fidelity International has raised questions about the investment climate in Europe. While acknowledging signs of recovery, the article emphasises the need to address ongoing challenges, including inflation and regulatory uncertainties. Nonetheless, there is optimism about Europe’s potential for growth, with hopes for swift action by the European Central Bank to support economic stability.