Europe's investors head east

Moscow makes it into the investors' top 10

Investment into Europe may be slowing, but companies are becoming more adventurous, according to a report from Ernst & Young.

The accountants' ranking of the most popular foreign investment destinations places exotic targets such as Moscow, Budapest and Istanbul close to the top, ousting some established West European regions.

Overall, the number of investment projects into non-EU Europe grew by 21%, while deals into the EU shrank by 11%.

Europe as a whole garnered 1,895 new foreign investment projects last year, down 4% year on year.

But the number of jobs involved - 242,000 - was down by one-third on 2001, indicating that the average project size is shrinking.

Eastward ho

The balance between east and west has not shifted completely.

The 10 mainly East European countries waiting for admission into the EU account for just 15% of the continent's total foreign investment, less than the UK on its own.

But the only West European country where investment activity is growing is tiny Portugal, Ernst & Young calculated.

It seems likely that the 2002 trend will continue, especially as impending EU accession makes investment in countries such as Poland ever easier.

And half of the top 20 investors were car or car components firms, which have been among the quickest to realise Eastern Europe's potential for low-cost manufacturing.

Money worries

According to Ernst & Young, the figures also reveal a lukewarm corporate attitude to the euro.

In 2000, the eurozone accounted for 51% of total investment into Europe; last year, that figure was just 44%.

Strong euros upset company calculations, E&Y says

"The issue of euro membership appears to be a bit of a damp squib," said Barry Bright of Ernst & Young.

"Whilst there are undoubted financial benefits... these appear to be counterbalanced by concerns over reductions in growth rates in major markets."

If the euro continues to appreciate, that will further constrict eurozone inward investment, Ernst & Young predicts.