From Site Selection magazine, November 2000
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Despite their dwindling labor pools, the major European markets are still atop the list of business locations (see chart). The UK and Ireland continue to attract some 40 percent to 50 percent of US investment, and Japanese investors, though their numbers are much less today than 15 years ago, strategically place locations in the major markets of the UK, Germany and France. Specifically speaking the US companies typically go to the major metros of Dublin, London, Ile-de-France (Greater Paris) and Amsterdam. In fact, "one in five US investments goes into the Greater London area," says Roel Spee, director with PWC-PLI. And in the past, Japanese firms located most of their European headquarters in Germany's Dusseldorf and Frankfort markets. Language familiarities and historical ties make the UK and Ireland much more comfortable locations for US investors. Japanese firms, on the other hand, thought locating in major markets throughout Europe was a much more strategic plan for reaching the entire continent. European companies, however, already have a strong presence on the continent, and so they have lead the way in the move toward Eastern Europe. "Eastern Europe is the logical next step to grow their business," Spee says. "And European firms are more familiar with Eastern Europe as a new environment to set up operations. Lots of German companies when the Wall came down immediately moved to the Czech Republic because it is a fairly small step for them, but a huge difference costwise." The Eastern European countries receiving the most attention are Poland, Hungary and the Czech Republic. Within those countries, the hot spots there, like most emerging economies, are the capital cities: Warsaw, Budapest and Prague. Spee also adds the southern Poland city of Katowice as a hot market, especially for automotive manufacturing. "General Motors set up a car manufacturing plant in that area a couple of years ago, and as we've seen in recent years in the automotive industry, a lot of suppliers have followed the major car manufacturers," he explains.
Although most of Europe's major metropolitan markets continue to attract a wide array of industries, such industry clusters as that in Katowice are becoming more pronounced throughout the continent. Electronics, for example, have found a home in the Eastern European countries. Spee cites such names as Flextronics, Philips and IBM as firms with manufacturing operations in the Budapest area.
"The Czech Republic and Hungary has a lot of expertise with mechanical operations, mechanical engineering, the more electronics-oriented, so those industries looking for those types of skills are locating in those areas," says Spee. "The whole region between the capital city of Budapest and Vienna, Austria, has seen a real zone develop in the last couple of years that has attracted a lot of electronic companies." The pharmaceuticals industry, which typically has high profit margins, has found Ireland a particularly nice spot for operation due to the low tax rates. So much so that even though many pharmaceutical companies have merged and consolidated operations throughout Europe, "they continue to expand in Ireland," Douw explains. American Home Products Corp. recently announced a US$758 million investment in Dublin, creating 1,300 jobs. Chemical firms, much like the automotive companies, are bringing with them large numbers of supply companies to port locations like Rotterdam, the Netherlands; Antwerp, Belgium; and Le Havre, France. The chemical clusters, however, are going one step further by actually co-locating facilities. "They're literally setting up on the same sites to use the same infrastructure, same pipelines, same roads, same railways, same security services and so forth," says Douw. "By doing that they will reduce their costs dramatically, and because they very often use the same raw materials, they'll benefit from locating near the ports."
Perhaps the strongest industry cluster can be found in the software/IT/E-commerce industries. "Stockholm is the No. 1 region for those industries," says Douw. "Scandinavia in general is very strong -- Stockholm and Helsinki, Finland. Obviously it has a lot to do with the large companies already there -- Ericsson and Nokia, for example. But people in those areas are eager to learn and pick up every new technology development there is. That is an industry segment that will continue to cluster because the skills needed are developed at the large, major universities and where companies set up new R&D environments. So that trend will continue."
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