Leading companies in Europe expect the Covid-19 crisis will lead to accelerated uptake of automation as well as increased focus on climate change and supply chain risks, according to a survey by consultancy EY.
“Executives making location decisions expect three megatrends to drive their European investment plans in a post-Covid world: the acceleration of technology for cost reduction and customer access; a sharper focus on climate change and sustainability in investment decisions; reconfiguration of supply chains, with a new mix of reshoring, nearshoring and offshoring ,” EY’s 2020 Europe attractiveness survey said.
EY surveyed 113 business executives in April which megatrends they expect to accelerate the most in the next three years. A large majority (82%) agreed that “the adoption of technology that automates manual human processes” will accelerate in the next three years.
Another 57% expect their companies’ “focus on sustainability and climate change” to increase, and 56% of them expect “the reversal of globalisation” by way of deep supply chain restructuring.
Asked specifically about their plans to overhaul their supply chains, 83% of the executives surveyed expect to “move to nearshoring in low-cost areas just outside of the EU and in Africa”, while another 77% of the surveyed said they will “transition to lean or additive manufacturing (3D printing) to deliver advantages in speed, cost, precision and material”.
“This redesign of supply chains and the shift to both more local and regional diversification will allow organisations to increase their agility,” Julie Teigland, managing partner for EMEIA at EY, told fDi.
“We would hope that governments would encourage this trend by promoting investment in local infrastructure and onshoring/nearshoring hubs.”
Investment plans in jeopardy
Overall, two thirds of the executives surveyed by EY expect to phase down their investment campaigns in 2020.
The disruption caused by Covid-19 has also jeopardised the delivery of 2019 FDI projects, with more than one third of the projects announced in 2019 now expected to be delayed or cancelled, according to EY’s survey.
Service-orientated countries such as Ireland, Poland and Portugal are expected to maintain 80% of their announced projects, which is significantly higher than the Europe average of 65%. On the other hand, manufacturing investment in the transportation and textile industry will experience reduction in investment size as supply chain disruptions are affecting production and revenues.
Although uncertainty remains, Brexit is no longer perceived to be a major threat to FDI in Europe. Just 24% of businesses identify Brexit as one of the top three risks to Europe’s attractiveness in the next three years, down from 38% last year.