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back to index backEUROtalk August,  2005


Europe still no. 1 destination for foreign investors, while rampant China surges past the US

Western Europe still the most attractive economic zone for 63% of investors; Central and Eastern Europe increasingly viewed as a low cost” competitor for China, says Ernst & Young survey.

Western Europe still remains the most attractive region for foreign investment according to the annual Ernst & Young European Attractiveness Survey to be launched tomorrow at the World Investment Conference in La Baule, France.

The survey found that Europe is still on a par with its competitors as a viable zone for investment and is standing up to the dual challenge of the United States and China in attracting foreign investors.

Despite a slight reduction in the popularity of Western Europe as an investment destination among executives surveyed, it scored 63% on the global scale of attractiveness, (down 5% on last year) and remains ahead of Central and Eastern Europe, with 55%.

As the new star of foreign investment, China's impressive growth and the potential of China's domestic market is attracting a number of investors. China is now the leading country and the third-placed global zone for foreign investment. In twelve months, China's attractiveness has increased to 52% from 37%, allowing it to leapfrog the USA and Canada (45%).

Other key findings:

• 31% of international investment is directed towards Central and Eastern Europe, more than France, Germany, Spain and Belgium combined.

• Within Europe, Poland and Hungary are challenging the traditional supremacy of Germany, the UK and France, particularly due to their competitiveness in terms of labour costs.

• In terms of job creation by new establishments, 6 countries in Central and Eastern Europe figure in the European top 10, headed by the UK, Poland and France.

• The most dynamic sectors in Europe in 2004 were automotive, with 11.6% of international investment in Europe and hi-tech, with 10.9%.

• Central and Eastern Europe represent a viable alternative to China for the automotive, consumer goods and heavy industry sectors.

• Decision makers overwhelmingly view the service and software sectors as the future drivers of the Western European economy.

• Business leaders remain sceptical regarding an improvement in the attractiveness of Europe over the next 3 years (37% against 45% in 2004).

• Investors would like to see an easing of regulatory and fiscal policies to encourage investment in Europe.

Commenting on the survey launch, James Turley, Chairman and CEO of Ernst & Young, said, What makes Europe remain the most attractive destination for investment is the flexibility and the diversity of markets present in the region. Knowledge is a key factor drawing investors to Western Europe, but in the last five years economies in Central and Eastern Europe have been transformed from low-cost workshops into markets with huge potential. We are seeing a similar pattern in China, Russia, India and Brazil – countries which, in the next five years, will become increasingly innovative and present a real challenge to more developed markets.”

About the Ernst & Young Attractiveness Survey.

The Ernst & Young European Attractiveness Survey is a unique survey which evaluates, on a year-by-year basis, the position of Europe and European development, both within Europe's new frontiers and with respect to Europe's relations with economic centres of activity throughout the world.

The survey is based on opinions expressed by over 650 senior international executives in interviews between March and April 2005 conducted by market research company CSA, and data provided by the The Ernst & Young European Investment Monitor database, created in 1997 to monitor investments and activity in the region and powered by Oxford Intelligence.

About Ernst & Young

Ernst & Young, a global leader in professional services, is committed to restoring the public's trust in professional services firms and in the quality of financial reporting. Its 100,000 people in 140 countries pursue the highest levels of integrity, quality, and professionalism in providing a range of sophisticated services centered on our core competencies of auditing, accounting, tax, and transactions. Further information about Ernst & Young and its approach to a variety of business issues can be found at www.ey.com/perspectives. Ernst & Young refers to all the members of the global Ernst & Young organization.

Source: Ernst & Young - GAI


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