Foreign investment in Italy grows more than in France and Germany

It is the Eastern and Southern European countries that are attracting more and more capital from abroad. Amid the pandemic crisis, the war in Ukraine and rising energy costs, the growth rate of foreign investment has almost completely stalled in the two-year 2021-22 period. But today, countries like Romania, Portugal and Italy can rely more on outside resources than the Old Continent’s giants, France, Germany and the UK, to rebuild their value chains disrupted by the outbreak of Covid-19. This was expressed by research conducted by the O network of advisory services, which found that this reorientation of capital would be motivated by the low production costs that characterize the continent’s southeast economies.

“Foreign direct investment is vital to the European economy, accounting for 20% of Germany and France’s GDP and 28% of British domestic product,” the report said. After a record number of projects (over 6.6 thousand) registered in 2017, growth did not exceed 1% last year, highlighting how geopolitical shocks beyond Europe have alienated international investors and have an impact on the resulting employment created. 2022 alone.

Despite traveling well below the pre-pandemic average and having a 7% lower number of projects, it is the countries of the East and the South that recorded the highest foreign investment (FDI) growth rates today. As reported by Euractiv, Italy saw an increase of 17%, Portugal 24%, Poland 23% and Romania 86% compared to 2021 levels. FDI growth in Italy followed a total of 243 projects that created more than 20,000 jobs in 2022, with an average of 148 positions for each programme.

In the same period, the continent’s big names grew, but not as much as before. While France maintained the first place in the amount of foreign capital it attracted, it recorded a 3% increase in projects in its own territory. The only country to have increased in recent months was Paris, with German projects falling by 1% while England fell by 6%. “London is most upset, this figure is weighed down by international insecurity after Brexit,” said Julie Teigland, one of EY’s managing partners. Although the number of projects developed is lower than in France (1250 vs. 929), it should be emphasized that investments in London create around 9,000 more jobs than in France.

The study’s results show that the southeastern part of the continent is more attractive, influenced by the significant reduction in production costs (including worker wages) across the region. “The West to East and South reorientation is due, at least in part, to the restructuring of global supply chains, as well as the interest in places that manufacture at competitive costs,” Teigland said. This will be proved by the example of Spain. Of all the countries in the region concerned, Spain was the only country that did not see an increase in FDI, but instead saw a steep 10% decline following the tightening of precarious jobs initiated in early 2022. Among the countries, Northern Europe, Ireland was the sector that grew the most with +21% compared to the previous year. This figure reflects the pro-business agenda as low taxation continues to attract US companies.

Even if many of the factors that contributed to the disappointing trajectory of FDI in Europe in 2022, such as the geopolitical tensions and the conflict on the brink of the EU, persist, many believe that the enormous potential of suppressed demand during the years of the pandemic will soon unlock its enormous potential. According to 67% of companies interviewed by EY, “plans to expand operations in Europe in 2024” are in preparation. Many of these projects will intersect to impact multiple sectors, with a particular focus on digital transition, renewables and net zero emissions, all areas that require “bold strategies and ambitious investments”.