Content thumbnail European attractiveness survey January 2017
LONGER-TERM AGENDA

ey.com/attractiveness An EY survey on foreign investment decisions in Europe and the prospect of Brexit This report is part of a series by EY on the attractiveness of Europe and European countries for cross-border investments. Since 2000, this series has provided information on international location strategies and their impact on countries and cities in Europe. The global political, economic and investment landscape has a free trade agreement (FTA) with the EU. But continuing full entered an exceptional period of transition. In the US, newly membership of the single market was not an option. The UK appointed President Donald Trump has promised to recast US Government wishes to balance the needs of the UK economy with policies in ways likely to have profound effects both on the US the desire for control of borders and laws expressed by its citizens. economy and upon investment flows in the US and worldwide. EU leaders are clear and consistent that membership of the single market is incompatible with restrictions on the free movement of The tectonic plates of our multi-polar world are shifting. Companies their citizens. Business leaders must start preparing their analyses from China, India and other newer markets are continuing to and plans for life after Brexit. To help them in this process, expand on a world stage. Europe is changing too. This year will EY commissioned a survey to investigate what impact the see elections in the Netherlands, France and Germany which may referendum and resulting uncertainties are having upon foreign have far-reaching policy implications. Investors see uncertainty direct investors and their European ambitions. everywhere. As the year advances, EY’s European Attractiveness survey will aim to capture more outcomes and assess implications. Foreign direct investment (FDI) is vital to the economic well-being of the UK and the rest of Europe. The impact of Brexit on Our first step, however, is this attempt to look at the impact of investment mobility and location is therefore a critical issue for the UK’s historic decision to leave the European Union upon the companies and policy-makers. Last year, foreign investors made European investment landscape within this backdrop of continent- 5,083 decisions to set up or expand operations in Europe, building 6 wide change. or renewing productive assets and creating 217,666 jobs. Historically, the UK has been Europe’s top FDI destination. On 23 June 2016, the citizens of the UK voted by 51.9% to 48.1% According to our calculations, the UK secured a record 1,065 FDI 3 for their country to leave the European Union (EU). The UK projects in 2015 (20.9% of the European total), which created over 7 Government has said it expects to invoke Article 50 of the EU’s 40,000 jobs in the country in that year. Lisbon Treaty and thereby trigger negotiations with the remaining 27 EU member states in March 2017.4 Michel Barnier, the Chief There appears to be a growing likelihood that companies located Negotiator appointed by the European Commission to handle the in the UK will lose seamless access to the single market. And it 5 process, has said that a deal must be struck by October 2018. also appears likely that some companies — and not just those in The transition will coincide with wider changes in the political the financial services sector — will reshape, transfer, downsize or landscape as President Donald Trump begins to recast US policies. transform some of their operations both in the UK and sometimes, in consequence, elsewhere in Europe. However, some business Implementing Brexit will be extraordinarily complex. On leaders have already said that the current context will not change 17 January, Theresa May, the UK Prime Minister, said she hopes their plans to invest in the UK. to retain partial membership of the customs union, backed by Andy Baldwin Hanne-Jesca Bax Marc Lhermitte EY EMEIA Area Managing Partner EY EMEIA Managing Partner EY Advisory, Global Lead Attractiveness Markets & Accounts and Competitiveness 3 “EU referendum results and maps,” The Telegraph website, http://www.telegraph.co.uk/ news/2016/06/23/leave-or-remain-eu-referendum-results-and-live-maps/, accessed 1 January 5 “EU sees Oct 2018 Brexit deal,” Reuters website, http://in.reuters.com/article/britain-eu-barnier- 2017. idINKBN13V1DN, accessed 3 January 2017 4 “Theresa May to trigger article 50 by end of March 2017,” The Guardian website, https:// 6 European attractiveness survey 2016, EY, 2016 www.theguardian.com/politics/2016/oct/01/theresa-may-to-propose-great-repeal-bill-to-unwind- eu-laws, accessed 1 January 2017. 7 UK attractiveness survey 2016, EY, 2016. EY’s European attractiveness survey January 2017 3

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INTRO
EY's attractiveness surveys and program Contents How EY designed the research An EY survey on foreign investment Ten lessons learned (1-5) Ten lessons learned (6-10)
FOREIGN INVESTORS
Keen on Europe, yet cautious Global economic volatility and fragmentation EY POV - Jeremy Jennings EY POV - Alessandro Cenderello More active investment strategies EY POV - Jean-Benoit Berty
PAN-EUROPEAN INVESTMENTS
A rethink of pan-European investments EY POV: automotive -Jörg Hönemann The UK's attractiveness will be affected EY POV - Mark Gregory Europe's FDI map starting to shift Corporate income tax rate across Europe Cities compete for foreign investment
MANAGING THE PRESENT
Investors in Europe are focused on managing the present Deterioration in operating margins Plans to redesign supply chains EY POV - Olivier Macard EY POV - Mats Persson
LONGER-TERM AGENDA