|From Page 20 of Report |
A new survey published today by Big 4 accounting firm KPMG reveals future global capital flows based on corporate investment plans from over 300 of the largest multinational companies. Corporate investment strategists in Ireland and 14 other countries were asked by KPMG International where they plan to invest in the next 12 months and in five years’ time.
Global Corporate Capital flows 2008/09 to 2013/2014
The report says that had the research been carried out five or ten years ago, Ireland might have expected to feature as a preferred place to invest for many respondents looking for a business-friendly, low tax environment.
Today, corporations are looking elsewhere, and Ireland is not cited in any of the areas covered by the study.
However, the report says that those businesses now based in Ireland remain active investors overseas. Their focus for this year is the U.K., with 60 percent planning an investment, followed by the U.S. for 35 percent, Germany for 20 percent, France for 15 percent and Poland for 10 percent. Looking ahead, the U.K. remains in first place with 55 percent and the U.S. in second with 35 percent, but Poland takes third spot with 15 percent followed by Germany with 10 percent.
The survey covering 15 countries around the world, asked over 300 corporate investment strategists, plus representatives of private equity funds and sovereign wealth funds, where and how they expect to be investing the funds under their control both in the next 12 months, and in the next 5 years.
The countries covered were the US, UK, Germany, Spain, Netherlands, Switzerland, Ireland, Russia, India, Australia, Canada, China, Brazil, Mexico and South Africa.
Highlights from the survey include:
- China is expected to overtake the US as the world’s leading recipient of corporate investment in the next five years, and should become the most influential country in IT and telecoms, industrial products and mining
- India is likely to see the largest growth in its share of foreign investment overall, and should become the world leader for investment in manufacturing.
- European economies are expected to keep their attraction for investors, with the U.K. maintaining a very strong position, especially in financial services.
- Irish corporate investment is expected to continue to be focused on US and UK
- Irish Finance Directors believe that the current credit crisis will affect investment for the next two or three years, but will recover in the longer term
In contrast to the global trend of increased investment towards the BRIC (Brazil, Russia, India and China) economies, the majority of Irish foreign investment will continue to be focused on the US and UK markets. Despite BRIC economies performing well, Ireland’s long standing strong trading ties with the UK and the US influence investment decisions with 60% of finance directors expecting to make a significant investment in the UK and 35% expecting to make a similar level of investment in the US over the next twelve months. The outlook remains similar over the next five years with 55% expecting to invest in the UK and 35% in the US.
In terms of their overall investment funds, Irish Finance Directors again expect to invest the majority of their capital in the US and UK – 60% of Irish Finance Directors singled out the US and the UK as the countries which will receive most investment.
While the majority of Irish Finance Directors do not expect to make any major investments in the BRIC economies in the near future, their growing influence is recognised. 45% of respondents expect China to be in the top three countries dominant in terms of business activity in their sector.
Commenting on the survey, Donall Gannon, Partner, KPMG said: “Based on this survey Irish investment over the next few years will continue to be predominately into the UK and US markets. Irish investors have a high level of knowledge of these 2 markets and this is a considerable advantage in making a cross border investment. With the improvements in the German and Polish economies in recent years, these are becoming more attractive to Irish investors.
It may be a mixture of scale, distance and business culture but with a few exceptions Irish investment is lagging behind the current international trends of investing into the BRIC countries. It appears timely for Irish businesses to review their future investment strategies and consider these countries as a viable and attractive market.”
From a global perspective, China is expected to overtake the US as the world’s leading recipient of corporate investment in the next five years, and should become the most influential country in IT and telecoms, industrial products and mining, a new study of future global capital flows has found.
India is likely to see the largest growth in its share of foreign investment overall, and should become the world leader for investment in manufacturing. But the European economies are expected to keep their attraction for investors, with the U.K. maintaining a very strong position, especially in financial services.
The results showed a move away from investments in the U.S., Japan, Singapore and the UAE, and a big increase in flows to Brazil, Russia, China and India (BRIC).
China should receive significant investments from 24 percent of corporates surveyed in 2013/14, up from 17 percent this year. Russia can expect investments from 19 percent in five years, up from 12 percent this year, and Brazil can expect investments from 14 percent, up from 10 percent.
India’s share of investments is estimated to rise by 8 percent to 18 percent, the largest increase recorded and driven mainly by a major increase in investment in manufacturing. By 2013/14, India can expect investments in this sector from 25 percent of the manufacturing companies surveyed, and for two thirds of these companies it will be their first move into the country.
By contrast, the U.S. share of investments is expected to fall by 4 percent to 23 percent, still a very high proportion of global investment, but placing it behind China. The US is also expected to give up its dominance of the mining, industrial products and IT/telecoms sectors, with China taking first place in each case.
Although the major European economies can expect to be overtaken by the BRIC economies in their share of investment, this is only because the BRICs do particularly well. The U.K., Spain, and Italy can all expect an increase in foreign investment, and Germany can expect to maintain its current share.
The U.K. should remain the most popular developed economy outside the U.S., increasing its share of investment by 3 percent to 17 percent. In financial services, a traditionally strong sector for the U.K., the country is expected move from second place to equal first with the US in terms of global investment.