Content thumbnail European attractiveness survey January 2017
LONGER-TERM AGENDA

2. A rethink of pan-European investments and activities is looming Relocation may happen According to our survey, 86% of foreign investors with a logistics, production and headquarters operations may all be areas presence in the UK (75% of the sample group) have no plans to subject to review in the wake of the vote. change or relocate European operations in the next three years if the UK leaves the European single market. But 14% of those Economic decisions are no longer the primary driver for strategic present in the UK say they will change or relocate some activities if location decisions. Rather, wider geopolitical events and the impact Brexit happens. of resulting changes are becoming increasingly important factors to consider in investment decisions. Overall, only 11% of the 254 executives we interviewed plan to modify their presence in the UK and consequently, in Europe in the wake of Brexit. The precise consequences of a Brexit remain to be established. But relocation will not be a UK phenomenon If the UK leaves the European single market, will you alone. Deeper trends arising from technology change and global change or relocate the following operations in the economic re-balancing are causing many companies to rethink next three years? their international investment strategies. The UK referendum also coincided with a rise in protectionist forces more widely, especially Our company is not planning on relocating operations following the election of President Donald Trump in the US. Our company is planning on relocating operations This is a potentially significant trend, considering the importance of FDI in Europe and in the UK. In 2015, the stock of inward FDI % into the EU28 exceeded 48% of GDP. This stood at 54.5% of GDP 89 11% for the UK.11 For companies in some sectors, it may be necessary Overall to move some operations from the UK to an EU27 country in order to retain access to rights enjoyed only by EU companies. So, fund management companies, insurers and banks may need to set up a new entity regulated by an EU27 member so that they can continue to sell their products throughout the single market. The UK may become a less attractive location for some companies 86% 14% and operations. But for others, its appeal may strengthen. This will depend in part upon the return to stability and the evolution Established in the UK of public policies across Europe. An optimistic view of this survey would note that 9 out of 10 senior executives are not considering either changing or relocating operations. Yet, what we see now might be a once-in-decades change of 98% location strategies in Europe. Just as Brexit has raised questions of identity for citizens, so it also raises strategic questions for % 2 companies. Now is the right time for companies to ask themselves what their overall vision is and what general organization they Not established in the UK want in Europe. Our perception is that the current transition period brings a Source: EY’s European attractiveness survey January 2017 “strategic allocation agenda” to the table. The Brexit referendum (total respondents: 254). has had a destabilizing effect on companies everywhere. Our sample, though small, suggests that for some firms, back office, 11 “FDI Stocks”, OECD website, https://data.oecd.org/fdi/fdi-stocks.htm, accessed 29 December 2016. 12 EY’s European attractiveness survey January 2017

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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