Belgium holds up rather well in context of declining foreign investments in Europe, however, job creation gets a firm hit

• In a context of an overall decline in foreign direct investment (FDI) in Europe, Belgium managed to attract a total of 215 investments in 2023, down 8% compared to 2022.
  
• Nevertheless, our country moves up from 9th to 8th place in the European rankings, where there are declines almost everywhere.
• The drop in investments, however, hides a notable drop in related employment, which fell 39%.

This emerges from the 2024 edition of the Belgian Attractiveness Survey, an annual study conducted by EY that gauges the attractiveness of Belgium as a location for investment. EY is convinced of Europe’s recovery and growth potential, but Belgium needs to work on its attractiveness within that European market. 

Until further notice, foreign direct investment (FDI) does not get straightened out after the pandemic. The explanation once again must be sought in international investment decelerating due to disappointing economic growth, high inflation, rising geopolitical tension globally, and persistently high energy prices. These tensions are being felt all over Europe. The top ten countries with the most investments almost all recorded a decline. Only Turkey (+17%), the Netherlands (+7%) and the UK (+6%) were able to grow. The notably negative outliers are Germany and Italy, where foreign direct investment fell 12% each. Because Belgium’s decline was relatively limited to 8%, our country moved up one place within that top ten.

When examining the sectoral breakdown and activities of FDI, Belgium aligns with broader European trends. Although Europe saw declines in its largest investment sectors - software and IT services, as well as business and professional services - by 19% and 27% respectively, Belgium experienced a mixed response. Here, only the software and IT services sector saw a decline, while the business and professional services sector actually saw an increase, leading all sectors with 40 projects. It is followed by transportation and logistics, and pharmaceuticals.
 

Manufacturing proved resilient, both at European and at Belgian level

Investment in manufacturing proved resilient all over Europe, declining only 1%. In Belgium however, manufacturing has emerged as the primary driver of FDI with 63 projects, a strong increase from last year and in contrast to other sectors that experienced declines. Meanwhile, logistics, previously comparable to manufacturing in terms of project numbers, has fallen to 41 projects, now surpassed by business services, which attracted 46 projects. Both at European and Belgian level, manufacturing investments have most likely been sustained to meet expected rises in consumer demand. Efforts to restructure supply chains and shift production bases to Europe also helped maintain these investment levels.

Employment figures, however, are worse. The number of jobs associated with the 215 investments clocked in at 4,918, representing a substantial drop of 39% compared to a year earlier. Job creation also fell more sharply than the number of investments in the rest of Europe, 5% and 9% respectively. The service sector in particular saw the number of new jobs fall, while job creation in manufacturing managed to hold steady.
 

France dethroned the US as biggest investor in Belgium

The origin of foreign direct investments in Belgium remains in continual evolution. Last year, France dethroned the US as the main source of investment in Belgium. Our southern neighbors accounted for a total of 38 projects, while the US registered 29. An explanation for this decrease can be found in the success of the US Inflation Reduction Act (IRA), which may have diverted some investment from Europe to the US. Accordingly, the number of projects announced by US companies in Europe fell by 15% in 2023. In addition, we see confirmation of some other trends. For instance, investment from the UK continues to go downhill, from 27 in 2022 to 18 last year. Japan, on the other hand, continues to advance in the ranking of investors in Belgium, ending 2023 with 14 investment projects.

“In a year marked by general decline across Europe, Belgium did only slightly better. It will be crucial in the coming years to address the decline in employment linked to foreign investments and adequately support labor-intensive sectors and innovation. Urgent actions must also be taken to ensure Europe remains competitive in the face of increasingly stiff competition. Just think of the Industrial deal and Critical Raw Materials Act, for example”, comments Tristan Dhondt, partner at EY Belgium.
 

Investor optimism in Europe significantly higher than before the pandemic

Like every year, EY also surveyed international decision-makers about their investment intentions for the year ahead. That perception study shows that despite the unchanged tense geopolitical context, investor confidence in Europe has improved considerably. Around 72% of surveyed companies plan to start or expand operations in Europe by 2024. Last year, the figure was 65% of respondents. However, in Belgium, there was a slight decline in the percentage of companies planning to establish or expand operations. While last year 61% of surveyed companies had such plans, this year the figure has decreased to 59%. The primary motivations for starting or expanding in Belgium include accessing new markets and customers (38%), optimizing supply chains and logistics (37%), and seizing opportunities presented by new technologies (31%).

As many as 75% of respondents expect Europe’s attractiveness to improve over the next three years. In the same survey last year, the figure was 67%. This puts investor optimism significantly higher than before the pandemic. Similarly, optimism prevails in Belgium regarding its attractiveness over the next three years. This year, 66% of respondents anticipate improvements in Belgium’s investment environment, up from 58% last year. However, they also highlight several risks: high levels of public debt impacting taxes, a tight labor market in specific regions, and challenges related to supply chains and sourcing difficulties.

“The broader European investment landscape shows signs of recovery, with increased optimism about future attractiveness. However, Belgium has seen a decline in its short-term appeal as an investment destination. While long-term prospects remain positive, immediate actions are required to address the concerns of high public debt and a tight labor market, which are impacting our competitive stance”, says Marie-Laure Moreau, partner at EY Belgium.
 

-End of press release-

About the Belgian Attractiveness Survey 2024

Our evaluation of FDI in Europe is based on the EY European Investment Monitor (EIM). This EY proprietary database enables us to track projects announced in 2023 across 44 countries. The database tracks the FDI projects that have resulted in the creation of new facilities and jobs.

We explore Belgium’s and Europe’s perceived attractiveness via an online survey of international decision-makers. For Belgium, field research was conducted by Longitude in February and March 2024, based on a representative panel of 200 respondents. For Europe, field research was conducted by Longitude in February and March 2024, based on a representative panel of 500 respondents.
 

About EY

EY exists to build a better working world, helping create long-term value for clients, people and society and build trust in the capital markets.

Enabled by data and technology, diverse EY teams in over 150 countries provide trust through assurance and help clients grow, transform and operate.

Working across assurance, consulting, law, strategy, tax and transactions, EY teams ask better questions to find new answers for the complex issues facing our world today.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. Information about how EY collects and uses personal data and a description of the rights individuals have under data protection legislation are available via ey.com/privacy. EY member firms do not practice law where prohibited by local laws. For more information about our organization, please visit ey.com.