Foreign Investment in Europe and SMEs

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Foreign Investment – FDI Figures Show European Countries Are Very Attractive Right Now!

Nowadays, businesses are witnessing globalisation on a larger scale and both SMEs and startups are not an exception. Indeed, they are more willing to invest abroad, looking for new and enriching ventures. FDI (Foreign Direct Investment) is the net influx of foreign investments, implying that it is the difference between foreign capital inflows towards resident companies and outflows towards foreign enterprises. Given the strategic trend of responding to national market pressure with global expansion, investing SMEs are gaining an increasingly consistent role in current FDI figures.

FDI figures testify that European countries remain very attractive in terms of foreign capital, which is a positive sign for European businesses. Although it takes into account solely business investments that surpass 10% of the entire ownership (i.e. cross­border mergers and acquisitions), FDI is a highly useful tool for investing SMEs to assess the potential outreach of a business and its attraction of foreign investments. It is beneficial for local SMEs and startups as well, since they could function as suppliers and partners. A high FDI inflow suggests higher revenues for the recipient country, which could, for instance, be reinvested in the infrastructures, enhancing its residents’ standard of living and ensuring optimal conditions for potential business expansions.

However, a substantial FDI in a country could alternatively lead to a contentious competition, forcing local SMEs and startups to rethink their business strategies in order to survive in the market. EuCham ­European Chamber has listed the European countries according to FDI inflow per capita figures. Luxembourg ranked first in Europe in attracting new foreign investors by providing controversial taxation policies. Ireland and Netherlands follow in the ranking. For a full report and PDFs visit: eucham.eu/charts

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