Content thumbnail European attractiveness survey January 2017
LONGER-TERM AGENDA

Foreign investors in Europe are focused on managing the present — for now A quarter of companies surveyed reported deterioration in their operating margins and a rise in the cost of purchases since the referendum The big sterling devaluation that followed the referendum has had the same proportion feeling pressure on their operating margins. immediate consequences for many companies. These have been However, 9% of companies not in the UK also reported squeezed compounded by increased uncertainty for many firms operating in margins and higher costs. the UK or trading between the UK and the EU27. Some companies also said the referendum had hit sales and A squeeze on operating margins has affected businesses across investment, damaged their relations with business partners in our panel, but companies with a strong presence in the UK were both the EU and beyond, cut their appetite for acquisitions, and hardest hit, with 31% reporting increasing purchase costs and impaired staff availability. A small number of companies have Am I well prepared for any uncertainty arising started to plan from a changing regulatory and risk environment for my business? A small number of companies have started to plan. Just 4% of the business leaders we interviewed said they were well-prepared for the uncertainty arising from a changing regulatory and risk environment. One striking finding from our survey is that many mid-sized cross-border investors, having US$150m to US$1.5b of annual sales, are not planning thoroughly for today’s increased geo-political risks. Most companies still have much work to do and this is even more difficult in a context that is constantly and quickly % changing. Increased risk is found throughout Europe: in the UK, 96 No Western Europe, Southern Europe, and Central and Eastern Europe. Geo-political and related cross-border risks are also high around the planet. In addition, our survey indicates that 10% of foreign investors have no plans in place to modify the way they do business if the UK leaves the single market, a proportion that is significantly % higher among companies without a presence in the UK (25%). 4 Yes Yet, given the scale and extent of current geo-political uncertainty across the European landscape, companies would be prudent to Source: EY’s European attractiveness survey January 2017 (total respondents: 254). ensure in advance that country operations have the stability, agility and local management ingenuity to overcome upsets. 20 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