The figures from Ernst & Young show that Poland, the Czech Republic and Hungary – the three central and east European countries that made it to the list of the top 12 recipients of UK outward investment – have all failed to increase their share of UK investment over the last decade. The report looks at foreign direct investment in terms of projects rather than investment flows. Nigel Wilcock, the Ernst & Young regional development director, said: “If anything, the numbers of reported projects with a UK origin to these countries has fallen.” He said the findings “undermine the expectation that the central and east European countries would start to dramatically in-crease their inward investment flows. Not only is there a problem of geographical distance but their economies remain relatively small compared to those of Western Europe.”
Wilcock said companies looking for a big reduction in manufacturing costs had already leapt across central Europe to lower-cost economies in Asia. He added that Russia, in particular, received “surprisingly little” UK outward investment compared with Sweden, Belgium and other smaller European nations. France remains the primary destination for outward investment, accounting for 23% of projects into Europe from the UK. This was more than double the share taken by Germany and Spain last year.
Ernst & Young said France dominated UK outward investment activity because of the size of its consumer market and its proximity. Many British companies regarded it as a convenient springboard into Europe. France has only once been knocked off the top spot in the last decade, by Ireland in 1998. The number of projects from the UK rose above 200 for the first time last year, to 239 from 178 in 2005. There has been a big shift in the types of projects favored. British manufacturing in Europe accounted for only 18% of the total last year, down from 50% in 1997. Sales and marketing projects have more than doubled over the same period. (FT.com)
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