There was a 36 per cent slide in foreign direct investment inflows into Europe in 2009 as economic uncertainty caused hesitation among investors, according to Ernst & Young's 2010 European Attractiveness Survey, entitled Waking Up To The New Economy.

The number of FDI projects in Europe decreased by 11 per cent to 3,303, while FDI job creation maintained a three-year downtrend, falling another 16 per cent to124, 923.

Foreign direct investment created 18 per cent fewer jobs in Western Europe and almost half of the shortfall was in the services sector, but industry suffered heavily too.

Although a majority of FDI in Europe still comes from traditional sources, such as the US, Germany, France and the UK, high growth economies are increasingly making their presence felt. Collectively, the BRICs (Brazil, Russia, India and China) are now the third largest investor in Europe and individually China ranks eighth in the top 10 largest investors.

In job creation the presence of rapid growth economies is even more noticeable: Chinese FDI is the third largest creator of jobs and Indian FDI is the eighth.

The survey highlights the fact that Western Europe is still perceived as the second most popular destination for FDI but in 2010 investors ranked China as the world's most attractive FDI destination, repeating its 2008 distinction.

"After a flight to the perceived safety of Europe in 2009, in 2010 investors look at a forecast global growth of four per cent, see that only one per cent is likely in Europe and turn their eyes to high growth markets. China has proved that political stability, advancing infrastructure and a vast internal market can co-exist with rapid growth, earning it an attractiveness rating of 39 per cent, a point ahead of Western Europe. India, with a score of 22 per cent, equals USA / Canada in attractiveness perceptions, although both trail Eastern Europe by two points," the survey says.

It adds: "Geography becomes a relative concept and old illusions about East and West have crumbled. Sophisticated economic centres, stability and attractive markets are found worldwide by global corporations originating in both mature economies and fast-growth markets."

Ernst & Young says European executives offer up-beat views on a variety of European business sectors such as information and communication technologies followed by energy and utilities, financial services and clean technology.

"Technology and innovation, as well as a green commitment, spread across many existing areas of the European industrial and business base, will drive tomorrow's European economy," it says.

The survey points out that Europe needs policies that remove barriers to its "undoubted" business and innovation talent, enabling Europe-based businesses to make the rapidly growing economies and their consumers the purchasers of Europe's products, services and ideas.

Eighty-five per cent of investors say they see Europe as a world class investment destination for innovation and 29 per cent see future European growth coming from SMEs.

"Europe needs to bring this innovative spirit and small business potential to the market place, meeting the demand from global consumers, specifically in rapid growth economies," the report says.

Investors believe that tomorrow's Europe will be created by its entrepreneurs, not its policy makers. The best way for states to stimulate future European attractiveness is to support SMEs and high-tech industries and innovation, and to reduce taxation and increase flexibility.

"The single clear message is: investors expect governments to guarantee security, stability and - in times of economic crisis - provide aid and growth through public initiatives. After removing the crutch, as conditions gradually normalise, investors remind us that they still believe private business and entrepreneurship are the drivers essential to Europe's economic future," Ernst & Young says.

According to the survey the United Kingdom - despite suffering a deep and long recession - remains the most attractive destination for FDI into Europe. It attracted 21 per cent of new FDI decisions, including 25 per cent of all FDI services projects in Western Europe.

"The UK's continuing strength in financial services underpinned its receipt of 30 per cent of business services projects, 36 per cent of software projects and 27 per cent of financial services projects in Western Europe. Together these sectors secured 42 per cent of the jobs created in the UK.

"The UK attracted 54 per cent of all Indian FDI projects into Europe and Indian investors are the second-ranked FDI provider in the business services, software and financial sectors, behind the US," it says.

France, Germany, Belgium and Russia are the second, third, fourth and fifth most attractive destinations respectively for FDI into Europe.

The survey says Turkey has recently become a highly attractive destination for industrial investment and it secured nine per cent of the jobs created by FDI in Europe. Investors increasingly see Turkey as a bridge between Europe and Asia, offering access to developed European markets but with low labour costs.

The top 20 FDI sectors (job creation) in Western Europe in 2009 are, in order of rank, automotive, business services, software, machinery and equipment, electronics, food, transport services, electrical, pharmaceuticals, retail, financial intermediation, chemicals, transport equipment, computers, scientific instruments, air transport, insurance and pensions, publishing, fabricated metal and plastic and rubber.

Challenged to predict or contradict the possibility of a de-industrialised Europe, 70 per cent of business leaders interviewed in the survey say that in 2020 they will still manufacture in Europe. However, 53 per cent of the investors surveyed say they have no plans to invest in Europe this year. "The majority of business leaders are currently focused on maximising returns from their existing assets and not on investing in new capacity," the report says.

More than a third of all business leaders polled, and half of those from Northern Europe, predicted that in 2020 Europe will be the global leader in green technology and growth.

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