In 2023, the largest share of foreign direct investment (FDI) in Poland was held by American and German companies, according to Monday's publication by consulting firm EY. Great Britain and France came next.
EY in the study entitled: “Europe's Investment Attractiveness 2024” reported that last year Europe experienced the first decline in foreign direct investment in years. It was calculated that the number of projects was lower by 4% y/y, and the number of new jobs created decreased by 7% y/y. However, the authors of the study pointed out that Poland – compared to other European countries – is doing quite well, because although the number of FDIs fell by 3% compared to 2022, the number of jobs created by these investments increased by 21% y/y.
“Every government and country is fighting for new investments at home”
“German investors play a huge role in this, as they have been among the top countries investing in our country for another year,” it was emphasized. The EY study shows that in 2023, German companies implemented 36 projects in Polandwhich gives 16 percent of all foreign investments last year and the creation of 2 thousand jobs. It was indicated that this gives To the Germans second place in terms of the number of FDI flowing into Poland, after United States (52 projects, 9,805 jobs last year). The next places in the ranking were taken by Great Britain (13 projects, 1,324 jobs) and France (12 projects, 794 jobs). According to Paweł Tynel, Partner at EY Polska, this is an increase in costs, including energy prices on the German market, encourages local companies to relocate and expand production plants in other regions of the continent. – Investors surveyed indicate that the main motivation is to reduce production costs, while the second one is access to qualified employees, which, in the face of increasing labor costs in Poland, is becoming our main advantage – he pointed out. – In addition, the location and geographical proximity to target markets also help a lot, because each additional kilometer of delivery means additional costs and time for delivering products within the entire supply chain – added Tynela. He noted, however, that other countries in our region are also interested in the same investments. – Competition for projects is serious and there is no sentiment. Every government and country fights for new investments in their country. – Tynel noted.
Changing the structure of foreign investments by companies
The authors of the report noted that the structure of foreign investments by German companies has changed in recent years. “We see an increased willingness to make foreign direct investments in companies from industries such as machinery and equipment production (an increase from 8.5% of total German investments in 2019 to 11.6% in 2023), while the German software and IT industry is investing much less today (a decrease from 10.9% in 2019 to 8.5% in 2023),” Tynel pointed out. He added that half of German investments in Central and Eastern Europe in recent years were related to industry.
The largest German investments are most often carried out in Silesia and Lesser Poland, where, among others, a factory of electric Mercedes delivery vehicles and a factory of Bosch heat pumps were located. – These regions offer solid industrial infrastructure, qualified staff and a convenient location on the map of Poland, which facilitates logistics and supply chain management. Additionally, the development of industry in these regions, especially in sectors such as mining, metallurgy and industrial processing, makes them attractive to foreign investors looking for established industrial bases – explained Tynel.
The largest German investments are most often carried out in Silesia and Lesser Poland.Shutterstock
As the EY report shows, 2023 ended with a significant decline in the number of US investments in Europe (-15% y/y, -29% from 2019). According to experts, this is due to, among other things, the country's introduction of the “Inflation Reduction Act” system of incentives for investors.
– The diminished interest of Americans in Europe may mean that effectively attracting German investors will prove to be very important for the development of the Polish economy in the coming years. The free movement of capital is one of the fundamental principles of the European Union, but the authorities in Germany will undoubtedly do everything to encourage their entrepreneurs to invest their capital at home, not abroad – Tynel noted.
About the EY study
The EY “Europe's Investment Attractiveness 2024” study consists of two parts. The first is quantitative data collected as part of the EY European Investment Monitor (EIM), in cooperation with OCO, on foreign investments announced in 45 European countries in 2023, which result in the creation of jobs and opening of new facilities. The study does not include portfolio investments and mergers and acquisitions. The second part is a qualitative study of the perception of Europe by foreign investors, which was conducted in February-March 2024 by Longitude in the form of an online survey conducted among a representative panel of 500 business respondents responsible for investments.
Main image source: Shutterstock