European
EU25 Foreign Direct Investment 2005; Ireland has disinvestment of €20bn, UK biggest FDI player
By Finfacts Team
Jul 18, 2006, 11:10

In 2005, EU25 FDI1 (foreign direct investment) in extra-EU25 countries (outflows) increased by 19%, to €153 billion compared to €129 bn in 2004, while FDI into the EU25 from the rest of the world (inflows) increased by 23%, from €57 bn in 2004 to €70 bn in 2005.

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Eurozone countries in blue

These increases were strongly influenced by EU25 flows with North America. In 2005, the EU25 invested €26 bn  in the USA and €9 bn in Canada, compared with €7 bn and €2 bn respectively in 2004. The USA invested €18 bn in the EU25 in 2005 and Canada €7 bn, compared with US investment of €15 bn and Canadian disinvestment of €3 bn in 2004. Excluding North America, EU25 investment in other extra-EU25 countries fell by 2% in 2005, while investments coming from the rest of the world excluding North America remained stable.

In 2005, intra-EU252 FDI flows increased by about 80% from 2004.

These figures3, published by Eurostat, the Statistical Office of the European Commission, come from first results for 2005 and revised data for 20044 for FDI.

United Kingdom, France and Luxembourg main actors in extra-EU25 FDI flows

The United Kingdom, with outflows of €56 bn euro, and a 37% share of the EU25 total, was the largest investor in extra-EU25 in 2005, followed by France (€19 bn or 12%) and Luxembourg (€16 bn or 10%). With regard to extra-EU25 inflows, the United Kingdom, with €17 bn, and a 24% share of the EU25 total, was the main recipient of FDI, ahead of Luxembourg (€14 bn or 20%) and France (€13 bn or 19%). The role of Luxembourg in EU FDI is mainly explained by the importance of its financial intermediation activity5.

In 2005, the EU25 was a net investor in the rest of the world, with outflows higher than inflows by €83 bn euro (0.8% of GDP). In 2004, outflows were higher than inflows by €72 bn (0.7% of GDP). Among the Member States, the United Kingdom was the highest net investor outside the EU25 in 2005, with a difference of €39 bn. With inflows higher than outflows by €1 bn, Poland was the largest net recipient of FDI from extra-EU25.

Netherlands main investor, United Kingdom main recipient of intra-EU25 FDI

The Netherlands (€87 bn ), France (€61 bn) and Luxembourg (€49 bn) were the main investors inside the EU25 in 2005. The main recipients of investments from other Member States were the United Kingdom (€115 bn), Luxembourg (€43 bn) and the Netherlands (€30 bn), while Ireland recorded disinvestment of €20 bn.

Many US multinationals, have their regional headquarters in the Netherlands.

Ireland operates as a conduit for US multinationals' overseas profits to take advantage of a tax exemption on patent income. For example, Microsoft has an Irish subsidiary Round Island One Ltd., which controls more than $16 billion in Microsoft assets. It had gross profits of nearly $9 billion in 2004 and operates from the offices of a Dublin legal firm.

In 2004, the US Congress agreed an amnesty to encourage the repatriation of profits form overseas units of US multinationals. That is one factor for the fall in 2005. However, FDI has been declining in recent years. FDI inflows to Ireland fell from €22.5 billion in 2003 to €11.7 billion, in 2004

(See: Microsoft to hide Irish Tax Haven data of subsidiaries that have saved it billions of dollars in US taxes

Foreign Direct Investment into OECD countries jumps 27% in 2005; Profit repatriation puts Ireland's FDI in red)

EU25 FDI flows: 2005 preliminary results by main partner, billion euro


 
Outward flows to:
Inward flows from:
Intra-EU25
Extra-EU25
of which:
Intra-EU25
Extra-EU25
of which:
US
CH
JP
CA
US
CH
JP
CA
EU253
354.5
152.5
26.1
5.9
-1.2
9.3
324.4
69.8
17.5
7.3
4.2
6.9
Belgium
11.8
9.6
5.4
-0.3
1.5
0.1
13.9
8.6
6.1
0.9
0.2
0.1
Czech Republic
0.2
0.5
-
-
-
-
8.3
0.5
0.1
0.2
0.1
-
Denmark
4.7
1.6
1.2
-0.1
0.1
0.1
2.3
1.8
-1.7
0.9
-
0.1
Germany
25.4
11.3
-5.6
4.8
-1.6
2.3
23.8
2.4
0.4
3.3
-0.1
0.8
Estonia
0.3
0.2
-
c
-
-
2.2
-
-
-
-
-
Greece*
0.1
0.7
-
-
-
-
-0.3
0.1
-
-
-
-
Spain
20.7
10.5
2.6
3.6
0.1
0.1
15.6
2.9
2.2
-0.3
0.3
-
France
60.5
19.4
8.0
5.1
0.8
0.6
27.5
12.5
8.3
2.1
-0.6
-0.1
Ireland
9.0
1.9
-3.9
0.1
c
0.1
-20.4
-4.7
0.5
-1.5
1.7
-0.7
Italy
27.4
6.1
1.1
0.4
-
-
14.1
1.6
1.0
0.4
0.1
-
Cyprus
0.2
0.2
-
-
-
-
0.5
0.4
-
-
-
-
Latvia
-
0.1
-
-
-
-
0.3
0.2
-
-
-
-
Lithuania
0.1
0.1
-
-
-
-
0.6
0.2
-0.1
-
-
-
Luxembourg**
48.9
16.0
0.7
0.2
0.1
0.7
42.8
14.0
2.1
0.2
-0.2
4.3
Hungary
0.3
0.7
-
-
-
-
4.7
0.5
0.2
0.1
0.2
-
Malta
:
:
:
:
:
:
:
:
:
:
:
:
Netherlands***
87.1
10.0
1.4
3.0
-0.2
0.5
29.5
6.1
2.9
-3.4
-0.1
0.7
Austria
3.6
3.8
-
0.4
-
-
6.3
0.9
0.3
0.2
-
0.1
Poland
0.9
0.4
0.1
0.1
-
-
5.1
1.5
0.4
0.2
0.2
-
Portugal
1.7
-0.7
0.1
-
-
0.2
3.0
-0.4
-0.1
-
-
0.3
Slovenia
-
0.5
-
-
-
-
0.5
-
-
-
-
-
Slovakia*
0.1
0.1
-
-
-
-
1.4
0.3
0.1
-
-
-
Finland
4.4
-2.2
0.4
c
-
0.9
3.2
0.5
0.1
0.1
-
-
Sweden
5.4
15.6
-2.1
1.2
-
-
0.3
10.7
-0.2
-1.3
-
0.3
United Kingdom****
25.8
55.5
24.0
-2.0
-1.5
4.4
115.4
16.9
8.5
0.6
2.0
0.5

Minus sign stands for disinvestment
US = USA, CH = Switzerland, JP = Japan, CA = Canada
: Data not available - Less than EUR 50 million c Confidential
* Data without reinvested earnings.
** Data including Special Purpose Entities (see footnote 3).
*** Data excluding Special Purpose Entities.
**** Estimate

EU25 FDI flows: 2004 revised data by main partner, billion euro


 
Outward flows to:
Inward flows from:
Intra-EU25
Extra-EU25
of which:
Intra-EU25
Extra-EU25
of which:
US
CH
JP
CA
US
CH
JP
CA
EU253
211.3
128.9
7.2
-15.8
4.7
1.6
162.7
56.9
15.3
14.6
6.5
-2.5
Belgium
24.2
2.8
-2.9
-1.1
0.6
-0.1
24.9
9.0
3.5
-0.2
0.4
0.1
Czech Republic
0.2
0.6
-
-
-
-
3.2
0.8
0.4
0.1
-
-0.1
Denmark
:
:
:
:
:
:
:
:
:
:
:
:
Germany
2.6
-1.0
-7.1
1.3
0.4
0.4
-12.7
0.6
2.7
0.1
0.6
0.3
Estonia
0.2
-
-
-
-
-
0.7
0.2
-
-
-
-
Greece*
0.3
0.2
0.1
-
-
-
0.9
0.2
0.1
0.1
-
-
Spain
37.1
11.6
-0.4
1.5
0.1
-0.5
17.8
2.2
-0.4
1.1
0.2
0.6
France
36.1
2.4
-1.0
0.9
-0.4
0.1
18.6
1.0
4.7
1.3
-0.3
0.5
Ireland
8.6
6.0
1.5
0.1
c
0.1
3.4
-12.0
-8.4
0.3
1.8
-0.1
Italy
15.1
0.5
0.5
-0.9
-
-
11.1
2.5
0.7
1.2
0.2
-
Cyprus
0.3
0.2
-
-
-
c
c
c
0.1
-
-
-
Latvia
-
0.1
-
-
-
-
0.4
0.2
-
-
-
-
Lithuania
0.2
-
-
-
-
-
0.5
0.2
-0.1
-
-
-
Luxembourg**
58.9
6.9
4.9
2.7
-
0.3
42.0
20.2
7.5
1.6
-
-5.8
Hungary
0.6
0.3
-
-
-
-
2.1
1.6
-
0.3
0.1
-
Malta
:
:
:
:
:
:
:
:
:
:
:
:
Netherlands***
8.4
5.6
-4.5
-0.8
0.3
0.5
6.9
-6.5
-7.7
1.9
0.6
0.5
Austria
2.9
3.0
-
0.2
-
0.1
2.5
0.5
0.1
-0.2
-
0.1
Poland
0.3
0.3
-
0.2
-
-
9.7
0.6
0.1
0.3
0.1
-
Portugal
5.4
1.0
0.2
-
-
-
-0.3
2.2
0.1
0.1
-
-
Slovenia
0.2
0.1
-
-
-
-
0.5
0.1
-
0.1
-
-
Slovakia*
-
:
-
-
-
-
0.6
-
-
-
-
-
Finland
-1.5
0.6
0.5
-0.6
-
0.1
2.6
0.2
0.1
0.3
-0.1
0.1
Sweden
10.8
6.1
0.7
-1.6
-0.1
0.2
5.5
4.7
5.2
0.2
-
0.1
United Kingdom
17.1
59.2
19.9
-10.2
0.1
1.9
36.5
8.7
-5.4
4.5
1.3
c

Minus sign stands for disinvestment
US = USA, CH = Switzerland, JP = Japan, CA = Canada
: Data not available - Less than EUR 50 million c Confidential
* Data without reinvested earnings.
** Data including Special Purpose Entities (see footnote 3).
*** Data excluding Special Purpose Entities.
 

  1. Foreign direct investment (FDI) is the category of international investment that reflects the objective of obtaining a lasting interest by an investor in one economy in an enterprise resident in another economy. The lasting interest implies that a long-term relationship exists between the investor and the enterprise, and that the investor has a significant influence on the way the enterprise is managed. Such an interest is formally deemed to exist when a direct investor owns 10% or more of the ordinary shares or voting power on the board of directors (for an incorporated enterprise) or the equivalent (for an unincorporated enterprise). FDI flows presented here include re-invested earnings, unless specified. In comparing 2005 and 2004 data, it should be kept in mind that 2005 data are preliminary estimates, while data for 2004 are semi-final.
  2. There is a statistical discrepancy between intra-EU inflows and outflows for both 2004 and 2005. The annual rate of change has been calculated based on the average of inflows and outflows.
  3. The figures presented are based on data received up until 30 June 2006 from the Member States. Data for the EU aggregate takes into account confidential data, estimates for Member States missing data and data for Special Purpose Entities (SPEs), that are additionally collected by Eurostat and the ECB from Member States not including SPEs’ FDI in national data. This insures adherence to international standards, exhaustiveness of the EU aggregates and explains why the total of Member States’ flows differs from the EU25 aggregates. SPEs are mainly financial holding companies, foreign-owned, and principally engaged in cross-border financial transactions, with no or negligible local activity in the Member State of residence.
  4. With respect to the figures published on the Eurostat website since 5 April 2006, referring to data for 2004, EU25 outflows to extra-EU25 are revised 12% upwards. EU25 inflows from extra-EU25 are revised 8% downwards.
  5. Data for Luxembourg include SPEs, which account for approximately 85-90% of Luxembourg's FDI inflows and outflows.


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