Europe is feeling its age and needs to attract significant levels of investment for an infrastructure facelift. This investment is necessary for economic competitiveness and growth. Since the global financial crisis and sovereign debt crisis, European governments have been curtailing spending, resulting in a drop in capital funds available to improve critical infrastructure. For example, there has been a fall in transport infrastructure investment of nearly 11% from 2008 levels according to the European Investment Bank.
In response to this funding gap, the Investment Plan for Europe was introduced in November 2014 to unlock at least €315bn of public and private investments by the end of 2017. This initiative seeks to remove barriers to investment and mobilise public and private resources. Its key element is the European Fund for Strategic Investments (EFSI) which can be combined with other EU grants (such as the Horizon 2020 and European Structural and Investment funds) to help address market gaps and attract private investment. EFSI is worth a total of €21bn and as of June 2017, has helped to secure an additional €209.1bn of business and infrastructure funding.
As well as the leveraging effect of the funding, another key output has been the European Investment Project Portal. This is an open database providing a platform for listing potential public-private partnership (PPP) opportunities, helping to address one of the concerns of private investors, namely a lack of pipeline of investable projects. The PPP market is highly concentrated in Europe, focused on the UK, Italy, France, Germany and the Netherlands. The UK in particular has been astute at turning infrastructure investment in to an FDI success story. In the country's latest annual report (2016-17), infrastructure was the fourth best performing sector, winning 184 FDI projects and creating and safeguarding 7604 jobs.
Europe needs to offer the best infrastructure and to do so needs private sector investment. If it can continue to help to reduce risk, improve transparency and offer a more stable regulatory environment, it can attract crossborder private investors and help raise its FDI performance at the same time.
Douglas Clark is director of Location Connections, consultants for economic development innovation.