According to the Global FDI Annual Report 2022, produced by GlobalData and Investment Monitor, the number of greenfield foreign direct investment (FDI) projects in Europe surged by 17.9% in 2021. Following an 8.8% decline in European investment levels between 2019 and 2020, project numbers bounced back in 2021 and exceeded pre-Covid-19 figures.
Of the 7,927 projects tracked in Europe in 2021, 78% were in western Europe and the remaining 22% were in countries across central and eastern Europe and the Commonwealth of Independent States (CEE and CIS). Western Europe continued to increase its share of regional FDI in 2021. It accounted for 76.1% of European projects in 2020, and 75.3% in 2019.
Germany is the world’s leading FDI destination
Germany received 1,537 FDI projects in 2021, making it the top investment destination globally. Although it experienced a slight decrease (-1.9%) in investment levels compared to 2020, Germany was able to eclipse the US, which suffered a more substantial 11% decline.
Almost 20% of inbound European FDI in 2021 was into Germany. Major investments included Ford Motor’s planned $1bn expansion of its factory in Cologne. The site will become the company’s primary electric vehicle facility. In addition, US tech giant Apple announced plans to establish a new facility focused on connectivity and wireless technologies in Munich as part of a $1.2bn R&D investment.
The UK was the second most popular FDI destination in Europe with 1,216 projects in 2021, a 47% increase compared to the previous year. UK FDI accounted for just over 15% of regional projects. Software and IT services was the UK’s top inbound FDI sector in 2021 with 285 projects. However, this is still a 5% decrease compared to 2019. Sectors that exceeded pre-pandemic levels included communications and media, financial services, and logistics.
Poland attracted 424 FDI projects in 2021, making it the top CEE and CIS investment location. The number of Italian FDI projects recorded grew by 69.1% between 2020 and 2021, making it the fastest growing country within the European top ten.
Ireland was the top European FDI destination per capita with 62.1 projects per one million people. It was second only to Singapore worldwide.
North Macedonia was the top European country (and second globally to Costa Rica) within the FDI inward performance index, attracting almost 12 times its share of FDI given the size of its economy.
Russia, which was the eighth most popular destination for European FDI in 2020, slumped to 16th place in the 2021 ranking. FDI into Russia fell by 45.2% during this period, and by 64% compared to 2019. Following the mass exodus of foreign companies from Russia in the wake of its invasion of Ukraine, FDI is practically non-existent in 2022.
The UK comes out on top for outbound FDI
Europe-based companies invested in more than 8,100 FDI projects in 2021, an 11.6% increase compared to 2020. Outbound investment has yet to exceed pre-pandemic levels and remains 0.9% lower than in 2019.
The UK was Europe’s top outbound FDI country in 2021. UK-based companies were responsible for 1,643 FDI projects in 2021, a 23% increase from 2020 and a 4% increase from 2019. The most prolific investors included Vodafone, InterContinental Hotels, BP and Deloitte.
Germany was the second most popular investing country, accounting for 1,205 projects in 2021. France placed third with 841 projects, up 6% from the previous year. Sweden experienced the biggest increase in outbound FDI within the top ten, with project numbers increasing by 62.9% compared to 2020.
Switzerland was the only country within the top ten to record a decline in outbound FDI between 2020 and 2021, with a 10.3% drop.
More than 20% of European FDI comes from the US
The US was the leading source market for European FDI projects in 2021. US-based companies invested in more than 1,700 projects, a 19.1% increase compared to 2020. German investors were the second most popular with 706 projects followed by the UK (663 projects). Almost 60% of European FDI came from other European countries.
Hong Kong, which ranked tenth overall, was one of the fastest growing investors in Europe in 2021. Hong Kong-based businesses invested in 190 European FDI projects in 2021, a 171.4% increase from 2020.
Out of the top ten source countries for European FDI, France and Switzerland were the only countries to record a decline in investment in 2021 falling by 1.7% and 13.5% respectively.
Software dominates European FDI
Software and IT services was the region’s leading FDI sector. Foreign companies created 1,428 projects in Europe in the industry in 2021. Almost 50% of global software projects were in Europe. The UK was the top destination for software FDI worldwide, followed by Germany.
Communications and media was the second most popular industry, representing just over 10% of total project numbers. It was also one of the fastest growing sectors within the region, climbing by 142.7% between 2020 and 2021. This increase was driven by an uptick in 5G and point of presence projects as well as edge locations and data centre expansions.
The number of renewable and alternative power projects into Europe also surged, growing by 55.5% in 2021. Several subsectors grew strongly including solar, offshore wind, and hydro power.
Two of the top ten industries recorded a decline in project numbers. The logistics, and construction and real estate sectors both contracted in 2021, dropping by 16.5% and 1.1% respectively.
More than one-quarter of European FDI projects were in sales, administration and marketing in 2021. Approximately 15% of European FDI projects were manufacturing operations. Technology, infrastructure and related projects saw a huge increase, up 271.4% from 2020.
Of the 16 business functions recorded, just two experienced declines in project numbers – construction projects dropped by 8% and healthcare provision operations fell by 3.3%.
Telia is Europe’s top investor in 2021
Sweden-based Telia was Europe’s top investor in 2021. The multinational telecommunications company and mobile network operator invested in 170 European FDI projects during the year. Most of these investments were focused on Telia’s 5G rollout across Estonia, Finland and Norway.
Five communications and media companies ranked in the top ten investors in 2021 – Hong Kong-based CK Hutchison, Germany’s Deutsche Telekom, Spain’s Telefonica and UK-based Vodafone.
Amazon, the overall top FDI investor worldwide, was the third largest in Europe. The company invested in 136 European projects in 2021, up from 84 in 2020. Spain and the UK were Amazon’s top destination targets within the region. Most of Amazon’s European investments (71.3%) were logistics facilities.
Note: Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan were not included in our analysis of FDI into Europe. Instead, these countries were included in our analysis of FDI in Asia-Pacific.