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Global companies expect to grow in Europe in next 3 years despite many uncertainties, EY survey reveals

by Laura Cavestri

In spite of geopolitical instability, financial volatility, and the unpredictable toll that the Brexit can (or will) take, 56% of international investors expect to grow their businesses in Europe over the next three years. It is for all accounts an unforeseen effect of Brexit, considering that when the same question was asked last May, only 36% of those polled responded the same way.

This is the main takeaway from Ernst & Young’s European Attractiveness Survey 2017, which details the Old World’s outlook for investments—with regard to the principal challenges for this year.

“Investments in Europe are growing,” states EY Italy CEO Donato Iacovone, “in spite of the uncertain political context. Among the critical factors, the area’s geopolitical instability is in 5th place (20%), behind the instability in the financial markets (37%), the EU’s political instability (32%), the Brexit (28%), and neo-protectionism (27%). In particular, 70% of the European businesses that we interviewed were impacted by Brexit, demonstrating the fact that its consequences were not limited to just the United Kingdom.”

The Brexit effect was mainly feared (33%) by companies that have offices in the United Kingdom, rather than those who haven’t established a base across the Channel. And among those present in the UK, 14% of the foreign investors polled stated that they intended to reallocate at least a part of their operations from the United Kingdom to the EU, after British Prime Minister Theresa May declared her intention to leave the Single Market. 11% plan to modify their operations in Europe once the Brexit takes effect.

Favorite destinations for possible transfers? Germany (54%), the Netherlands (33%), and France (8%). Nevertheless, 70% of those interviewed admit that the Brexit is already creating some impact, however small: on operating margins, and prices for both selling and purchasing.

Still, financial services companies are the most worried overall: 51% of those interviewed fear financial instability in Europe, 41% fear the Brexit effect.

“It’s important for our businesses,” concludes Iacovone, “to not just be ready to face the risks, but to adapt themselves, in order to seize the opportunities offered by digital technologies and internationalization.”