In brief
- Foreign investment in Europe declined 13% in 2020 as COVID-19 interrupted investment plans and triggered uncertainty.
- Investment is set to rebound this year as investors reignite projects paused in 2020: 40% aim to establish or expand operations in Europe in the next year, up from just 27% in early 2020.
- Policymakers must focus on skills, sustainability, stimulus and simplification to ensure Europe remains an attractive destination for many years to come.
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. 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.
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.
