May 11 (Reuters) - Low-cost economies in eastern and
southern Europe are being increasingly favoured for investment
as companies around the world revamp supply chains to make them
more resilient and cost-efficient, a study by professional
services group EY found.
The finding came as foreign direct investment (FDI) into
Europe as a whole last year stalled, with inflation, soaring
energy costs and the aftershocks of the Ukraine war dampening
interest.
The EY study, based on its in-house project tracker and a
field survey carried out earlier this year, found the number of
investments launched in Portugal during 2022 jumped 24%, with
Poland up 23%, Italy up 17% and Romania up 86%.
"This redirection from West to South and Eastern regions is
at least in part due to the reconfiguration of global supply
chains, as well as an inclination toward cost-competitive
European locations for manufacturing and back-office
operations," said EY EMEIA Area Managing Partner Julie Teigland.
Trade disruptions caused by the pandemic and in some cases
exacerbated by war and geopolitical tensions have been cited as
reasons why companies should look to make their supply chains
shorter and more resilient to shocks.
The EY survey showed such moves were still going on, with
52% of companies who responded saying they were creating more
regional supply models, 47% near-shoring closer to customers and
46% reshoring activity back to their domestic markets.
Teigland said that while this showed companies were heeding
calls to "de-risk", it was unlikely to lead to all-out exits
from China despite rising trade tensions with the West.
"Companies cannot ignore China ... But they can make sure
that not everything is controlled by, or runs through China -
and that is what they are doing," she said.
As a whole, the number of FDI projects launched across
Europe last year stood at 5,962, up just 1% from the year
before. However the number of jobs these projects created
dropped 16% to around 344,000.
Aside from south and east Europe, low-tax Ireland was the
other stand-out with a 21% rise in FDI projects as, despite
efforts to create a global minimum corporate tax, it was still
seen as broadly pro-business.
Unsurprisingly, the region's three largest economies -
Germany, France and Britain - continued to attract the bulk of
FDI into Europe.
Britain, however, saw a 6% fall in the number of projects
launched amid concerns about trade snags and labour shortages
due in part to its decision to leave the European Union.
"The UK is the most disrupted," said Teigland. "Brexit has
had a negative impact."
(Writing and reporting by Mark John
Editing by Mark Potter)
