It's all change in the economics of Europe. Forget the stimulus programmes; it is now austerity time, with government spending being slashed back and fiscal consolidation the order of the day.

The drastic shrinking of public sector spending across Europe could be viewed as an opportunity, as it means that there is scope for the private sector to fill the gaps. Indeed, the European market is ripe for companies that can help improve the productivity and performance of government services.


The services sector accounts for about 70% of GDP and employment in most European countries, and services are now the dominant type of FDI, particularly in Western Europe. If Europe wants to stay competitive in the global economy, it needs to build on its services capabilities. The new age of austerity could be just the shock needed to get Europe to raise its services game.

The EU Services Directive is currently winding its weary way through the legislative bodies of the 27 EU countries. Hopefully it will come into being soon, as it is going to make it much easier to deliver cross-border services across the EU market.

This directive will be great news for outsourcing companies, and also good for European companies thinking about nearshoring their business processes (sourcing them from a foreign country that is geographically close). In fact, this opportunity to nearshore could be just the thing to help Europe get fit and fabulous for more FDI attraction.

There are lots of location gems in Europe where nearshoring services would provide significant efficiencies and added value. They range from Estonia in the north, which is soon to be in the eurozone and is an IT leader in financial services, to Egypt in the Euro-Med area in the south, which has just been designated Offshoring Destination of the Year by the European Outsourcing Association. Look near and you may go far.

Douglas Clark is director of Techlocate, a site search and inward investment consultancy, which is part of RSM Tenon, a UK firm of accountants and business advisers.