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Which remains the most preferred European country for foreign investors?

2024-05-04 11:26:13Kosova&Bota SHKRUAR NGA REDAKSIA VOX

Which remains the most preferred European country for foreign investors?

For the fifth year in a row, France has beaten Germany and Great Britain to become Europe's foreign investment hub. Overseas financing was used to fund 1,194 projects in France last year, according to a new attractiveness survey published by Ernst & Young (EY).

This represents an annual decline of 5%, but still allows France to outperform its European counterparts. Investment projects fell 4% across Europe last year, with the UK and Germany down 6% and 12% respectively. The UK was home to 985 projects funded by foreign direct investment (FDI) in 2023, while Germany recorded a total of 733. The big three France, Germany and the UK attracted more than 51% of FDI on the continent.

Why is France an investment magnet?

"France's recent performance is largely the result of successive waves of reforms that have accelerated over the past ten years," the EY report said. Among other regulations, he specifically noted changes to labor legislation and the introduction of the PACTE law in 2019, designed to make it easier to set up companies in France.

"Skills, infrastructure and the market are the basis of France's attractiveness," added EY. "Despite criticism about the complexity of the administrative system, France's legal and regulatory environment is no longer a major obstacle." When French President Emmanuel Macron took office in 2017, one of his main promises was to revitalize the country's economy through pro-business initiatives. Seven years later, the results of the EY report have been celebrated by the French government.

Finance Minister Bruno Le Maire tweeted: "We are determined to continue on this path with major economic projects to come, such as the simplification of business processes, the reform of unemployment benefits and initiatives to increase the financial attractiveness of Paris".

Can France retain their title?

Despite France's success, that doesn't mean there aren't challengers for the FDI crown. Hot on the Elysee is Great Britain, with London named the top European region for overseas investment, despite the fact that the country as a whole lags behind its neighbour.

"While France has undoubtedly also benefited from the dire consequences of Brexit and Germany's difficulties, there is nothing to suggest that it will be able to rely on the drag of its main competitors in the coming years," EY said.

In 2022, political instability in the UK led to a 6% decline in FDI. This is despite the attraction of the country's favorable tax systems and London's sustainability as a financial and technology centre.

Last year's figures show signs of improvement, although the number of UK projects remains well below pre-Brexit levels. Investment rivals are also coming from across the Atlantic. Last year, the number of European projects funded using US money was 1,058, representing a 15% year-on-year drop – and a 29% drop compared to 2019.

EY argued that this was "undoubtedly" the result of the Inflation Reduction Act, a policy that created a range of tax incentives for projects in the US. France's victory should also be qualified by stating that many of its FDI projects are extensions of existing ventures. Last year, 36% of projects using overseas funding in France were started from scratch. This compares with 75% in the UK and 77% in Germany.


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