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Jun 11, 2018

Foreign investment surges in France as Brexit bites in UK

UK remains top for foreign direct investment but ‘Macron effect’ sees double-digit growth in France, says EY

‘The UK is feeling the effects of Brexit,’ states EY in its latest Attractiveness Survey Europe, which has been measuring the number of foreign direct investment (FDI) projects secured across Europe since 2000. 

While the UK remains the top destination for FDI in Europe – securing 1,205 projects across 2017 – this is just 6 percent higher than in 2016, following years of strong growth, with EY blaming ‘Brexit fears’ for the slowdown. 

After the UK, Germany comes a close second, securing 1,124 FDI projects over the year, another 6 percent rise on 2016 numbers. The UK, Germany and France secured almost half of all FDI projects across the continent, with each securing at least 1,000 of them. 

It is France, however, that has seen a real boost, something EY puts down to ‘the Macron effect’. Climbing from 779 projects in 2016 to 1,019 last year, EY notes that ‘France enjoyed surging project numbers (a rise of 31 percent) and has now become a direct competitor to Germany and the UK across the project spectrum.’

‘Slowing growth in new FDI projects in the UK during 2017 reflects more wariness among investors,’ write the study authors. ‘With a 6 percent increase in projects between 2016 and 2017, the UK shows resilience, but digging into our database reveals deeper trends in the UK’s share of FDI in Europe.

‘In our perceptions survey, uncertainty about the future trade relationship between the UK and the EU is the biggest concern: logistics and supply chain activities are expected to be most affected.’ EY adds that its research shows Brexit is likely to impact 30 percent of investors in Europe. 

But Brexit ranks only fourth in EY’s list of investor concerns for Europe, with geopolitics seen as the number one risk. This is followed by concerns over economic and political instability in the EU (excluding Brexit) and a rise in populist or protectionist feelings among politicians and populations. 

EY’s attractiveness surveys focus on FDI projects rather than the purchase of shares in companies, with this year’s authors writing that ‘[FDI projects] provide a demonstration of the forces deciding which cities, regions and countries will prosper – and which will stagnate’, adding that ‘FDI is part of Europe’s economic lifeblood.’

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...