Romania remains among the top 10 countries in Europe in terms of newly created jobs through foreign investment in 2013
- Eastern Europe continues to lose its shine
- Foreign investment projects into Europe reach all-time high in 2013
- US remains top investor in Europe, BRIC investment strengthens
- Five year pre- and post-crisis analysis highlights Germany as real FDI ‘winner’
Romania remains on the 10th position in Europe regarding the number of jobs created through foreign direct investment in 2013, according to the annual EY report - European Attractiveness Survey
. Thus, last year Romania has attracted foreign investment that generated 6,157 jobs, 13% less than the previous year, when FDI generated 7,114 jobs in Romania. First five countries in the ranking are the UK, France, Poland, Russia and Serbia.
Also, Romania has surpassed Hungary in the ranking of the most attractive countries for foreign investment in Central and Eastern Europe (CEE) in 2014, placing itself in the third position in the region, while Poland and the Czech Republic are on the first two places. However, the top two countries are on a downward trend in 2014 compared to 2013, while Romania's attractiveness increased by 2 percentage points. If this trend continues, Romania could exceed the Czech Republic in 2015, becoming the second country in terms of attractiveness for foreign investors in CEE.
Suffering from sluggish growth and unstable economic conditions, many of CEE’s leading FDI destinations saw a decline in 2013. On the whole, FDI projects in CEE declined by nearly 5%, while job creation fell by 4%.
The CEE region witnessed a decline in its key investment engine, the automotive sector. Yet overall, manufacturing projects retained their prime position in the CEE with 410 projects. The region also recorded a 55% increase in R&D operations, confirming a slow shift up the global value chain.
Foreign investment projects into Europe reach all-time high in 2013
Foreign direct investment (FDI) into Europe reached an all-time high last year, according to EY’s annual European Attractiveness Survey. The report, now in its 12th year, combines an analysis of international investment into Europe over the last year with a survey of more than 800 global executives on their views about how and where global investment will take place in the next decade
Despite the fact that Europe only pulled out of recession half way through the year, 2013 was a record year for FDI with 3,955 projects, up 4% from 3,797 in 2012. Among major markets, investment projects into the UK, Germany and France all increased, with only Spain and Eastern Europe showing declines.
Destinations: FDI by country
The UK once again took the lead in terms of FDI with 799 projects in 2013, an increase of 15% with Germany also showing a strong increase of 12% to 701 projects. More surprisingly France seems to have halted its decline as an investment destination with a project increase of 9%.
FDI projects in Central and Eastern Europe, including Russia, declined by nearly 5% while job creation fell by 4%, when the prolonged crisis reduced the number of decisions by Western European automotive companies or shared services outsourcers, for instance.
Analysis by sector and activity
Europe’s emergence from recession is also a reinforcement of its position for innovation-driven and high value-added investments. Software and business services remained the leading FDI sectors in Europe in terms of projects, with 509 (up 27%) and 483 (down 31%) respectively. Nearly half of the software projects originated from US-headquartered companies.
The other big winners in the year in terms of sectors were Pharmaceutical and Scientific research increasing 58% (to 141) and 96% (to 88) respectively. Unsurprisingly research and development showed a significant increase of 23% when project type was analyzed (with a 64% increase in job creation). Manufacturing showed an increase of 5% but job numbers were down 12%, investors remaining wary of Europe’s high labor costs.
Where is investment coming from?
Intra-European investment is Europe’s major source of FDI but, in terms of investment at a country level, the US remained Europe’s single leading FDI generator, accounting for 1,027 (or 26% of the total) inward investment projects in 2013. The UK increased its share of US investment projects – up from 26% to 27%, nearly double that of its closest competitor, Germany.
Overall, however, US investment fell 2%. By contrast investment from the BRICs significantly picked up with project numbers increasing 28% overall to 313 and job creation increasing 37% to reach 16.900 jobs. Chinese investment has increased three-fold in the last six years with Indian and Russian investment also at an all-time high in 2013. There was a similar upswing in the numbers of jobs that were created by BRIC projects – up 37%. Germany overtook the UK as the top destination for investment from the BRICs up 50% from last year.
Much of the overall improvement or decline in a country’ prospects for FDI was decided by its leading cities. Investment projects into London were up 21% to 380. London now takes nearly half of all the FDI projects into the UK, the highest proportion of any major European country. The major German cities of Düsseldorf and Darmstadt also saw major increases of 25% and 40% respectively. Helsinki was the fastest growing city in Europe with nearly 50% more projects. Other major European cities such as Paris, Barcelona and Dublin failed to attract as much new investment and it had a major impact on their countries’ overall rankings.
Eastern Europe – The major loser from the financial crisis
The 2014 survey also includes analysis of how five years of crisis and recession have impacted European FDI. Comparing 2009-2013 and 2004-2008 reveals some significant winners and losers. Eastern Europe which attracted substantial investment in the 2000s was the major loser from the financial crisis with project numbers down 12% whereas Western Europe the numbers rose 19%.
Among the major markets there was one easily identifiable winner in Germany whose project numbers more than doubled. The UK saw projects go up by a more modest 12% while France was flat. Other ‘winners’ among the larger markets included Spain, the Netherlands, Russia and Ireland. The top five ‘losers’ were all Eastern European countries as Romania, Hungary and Bulgaria’s investments all halved in the period.
Investors are more confident about Europe
The end of the recession in Europe also impacted the views of global investors that were polled in March 2014 about future prospects for European FDI. The 2013 survey had only 39% of investors saying Europe would be a more attractive investment destination in the next three years, with a 23% saying it would become worse. This year, the survey had 54% saying it would get better, and only 12% saying it would decrease. Asian investors were even more upbeat, with 60% having optimism in the future.
ICT, Life Sciences and Energy are highlighted by investors as the key drivers for European growth over the next decade.
Investors continued to highlight some of the long-term weaknesses of the European economy by highlighting the need to improve labor mobility and skills development while at the same time cutting regulation and deepening economic integration.
About the survey:
EY’s 2014 European Attractiveness Survey is based on a twofold, original methodology that reflects:
1) The “real” attractiveness of Europe for foreign investors. Our evaluation of the reality of FDI in Europe is based on EY’s EIM. This database tracks FDI projects that have resulted in new facilities and/or the creation of new jobs. By excluding portfolio investments, mergers and acquisitions, it shows the reality of investment in manufacturing or services operations by foreign companies across the continent.
2) The “perceived” attractiveness of Europe and its competitors by foreign investors. We define the attractiveness of a location as a combination of image, investors’ confidence and the perception of a country or area’s ability to provide the most competitive benefits for FDI. The field research was conducted by Institute CSA in February and March 2014, via telephone interviews, based on a representative panel of 840 international decision-makers.
About EY Romania
EY is one of the world's leading professional services firms with approximately 175,000 employees in 728 offices across 150 countries, and revenues of approximately $25.8 billion in 2013. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, EY has been a leader on the professional services market since its set up in 1992. Our over 450 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. From 1 July 2013, Ernst & Young becomes EY, the logo has been modified in response to this change and the company's new tagline becomes "Building a better working world". The new visual identity reflects the new strategy of EY, Vision 2020. For more information, please visit www.ey.com.