Foreign Direct Investment (FDI) into Europe is at its worst record ever. What we’re experiencing is a total collapse in pipeline and job growth in nearly every sector. According to the latest global FDI report trends, the annual count of inbound FDI projects has declined 19% from its high watermark in 2017. It’s a mounting crisis as businesses continue to struggle with elevated energy costs, an extreme geopolitical landscape, and ongoing global economic deceleration.
For one thing, in 2024, Europe went off a cliff in terms of manufacturing investments. They fell 9%, to the lowest number of new manufacturing projects since 2020. At the same time, greenfield schemes—a better measure of the vitality of new investments—took a 20% nosedive. Whether this trend to a poorer companies stock appreciation overall detracts from the overall attractiveness of the European market from foreign investors is more questionable though.
Key Highlights from the FDI Landscape
Luxembourg was the best performing country in this regard among OECD members, with the largest stock of FDI. Its ranking is indicative of the country’s intentional economic policies and positive business climate. Germany saw a 17% drop in FDI, extending an overall downward trend that has persisted since the COVID-19 outbreak began.
Spain was a beacon of positivity, with the country taking on 15% more projects in 2024 than its prior year. The country’s economy is booming, fueled by a developing economy with cheap energy and labor costs. On top of that, easier access to EU funds has powered this remarkable expansion. Spain’s experience is a useful counterpoint with an optimistic tale about how certain regions can continue to prosper even when the national economy suffers.
Today, France is still center stage for international energy and agri-food companies, continuing to be an important base for investment in AI. The construction firm’s new project starts were down by 14%. This drop was primarily due to continued political instability and skyrocketing labor expenses. This duality highlights the challenges of investing in some of Europe’s largest economies.
“While overall investment has declined, there is a significant opportunity for Europe to double down on investments in emerging sectors like renewable energy, AI and electric vehicles, which show real promise.” – Julie Linn Teigland
Sector Performance and Regional Variations
The formerly biggest sector for FDI – the software and IT services – fell by 17%. This downturn is a combination of factors, including increased budgets for outsourcing among companies seeking to manage their economic headwinds. In 2024, employment creation from FDI throughout Europe dropped by 16%. This decline serves as a poignant reminder of the real-world impacts of diminished investment activity on jobs.
Meanwhile, Poland has cemented itself into the economic psyche as an industrial and logistics powerhouse. That’s because it takes full advantage of its smart location, value for dollar and labor pool. The country experienced a phenomenal 13% growth in FDI projects, a remarkable story of resilience in the face of significant declines elsewhere. Among the other strong performers Austria (+31%), Switzerland (+25%), Finland (+13%) and Italy (+5%).
Denmark’s new projects performance was a staggering 86% higher than last year. This dramatic increase was largely driven by a tripling of business services, sales and marketing efforts. This increase is a result of Denmark’s increasing reputation as an appealing place for foreign investors looking to expand their business.
Business Sentiment and Future Outlook
Despite these pockets of opportunity across the continent, overall sentiment has changed dramatically between these businesses toward investment in Europe. Fewer than half—that’s only 59%—of businesses plan to invest in Europe over the next year, a sharp decline from 72% last year. In addition, 37% of firms have delayed, withdrawn or reduced the size of their planned investments in Europe because of the above-mentioned hurdles.
Julie Linn Teigland emphasized the importance of adaptability in her remarks on the current investment landscape:
“It is essential that we adapt and innovate swiftly to secure a prosperous future for Europe.”
The continuing slump in foreign investment is a clear indicator that stronger, more attractive policies are needed to pump life back into the European market. Investors are becoming more selective as they compare their options with opportunities growing up around the world.
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