Jeroen Bakhuizen, Regional Head of International Subsidiary Banking, Europe shares his views on investment trends and how HSBC can support companies’ growth plans in the region.
Businesses today are operating in a relatively uncertain global environment with slowing growth the norm for a lot of countries and even markets like China not achieving the amazing growth levels we became accustomed to.
Yet, despite the global growth slowdown, foreign direct investment into Europe hit a new record high in 2014, with US$305bn attracted into the region¹. It just goes to show that Europe remains an extremely attractive investment destination and some of the world’s biggest multinationals enjoy a significant presence in the region.
INVESTING IN EUROPE
For many multinationals Europe’s sheer size as a trading hub and consumer market means it is too big to ignore. The European Union (EU) is the world’s largest trading bloc, accounting for 16% of global exports and imports2. It has a combined population and GDP bigger than that of the US. It encompasses four of the world’s top 10 economies – Germany, the UK, France and Italy3.
And European economies are growing. HSBC Global Research expects average GDP in countries who share the euro as a common currency to expand by 1.5% in 20164. Growth is expected to be higher still in non-euro countries including the UK and Poland.
It is also interesting to consider the findings from EY’s European Attractiveness Survey 2015, which suggest that Europe has pulled further ahead of China as the world’s most attractive investment destination. In the survey, investors ranked Western Europe (50%) as the world’s most attractive FDI destination for the second year running and Europe as a whole is seen as increasingly attractive.
We work with companies across all industry sectors as they look to grow their presence in Europe and it is interesting to consider some of the trends we have seen recently in terms of investment into Europe. There has been a significant flow of investment from China and India into the automotive suppliers industry in Central and Eastern Europe. Indeed, for China, Central and Eastern Europe will play an important role in the country’s ‘One Belt, One Road’ (OBOR) initiative. The OBOR initiative was launched by President Xi Jinping in 2013 with the aim of developing and improving new trade routes with China and opening up new business opportunities. Plans for the initiative encompass over 60 countries, which make up 60% of the world’s population and a collective GDP equivalent to 33% of the world’s wealth, so it is a major undertaking. Europe is very much part of the initiative, with the 16 Central & Eastern European markets receiving particular attention under the ‘16+1’ initiative. And indeed our teams in Poland and Czech Republic are seeing increased inflows from China.
We are also seeing strong FDI activity in the pharmaceuticals market, and technology continues to be a major sector with US internet companies, for example, expanding quite aggressively in Europe. There are some interesting trends emerging in how multinationals are managing their treasury operations and cash management functions around the world. Companies are rationalising their facilities with many looking to centralise their Treasury operations via a Treasury Centre.
In Europe, for example, the main treasury hubs are the UK, Netherlands, Ireland and Switzerland. US companies especially have their regional treasury centres in one of these locations and set up a cash management pool with a regional or global provider.
Ultimately, many corporates are looking to reduce their banking relationships to one or two partners in the region.
A CONSISTENT GLOBAL SERVICE
Through our International Subsidiary Banking (ISB) teams we are excellently placed to support those businesses in their growth plans. In 19 countries throughout Europe, we have dedicated ISB teams and Relationship Managers that work with the European subsidiaries of multinational companies. Working with our teams on the ground means companies can benefit from our local knowledge and the support of our product specialists to meet their specific needs. Above all, though, the European subsidiary of a multinational headquartered in the US, for example, will receive the same level and consistency of service in France, Armenia, Germany, and so on, as it would in New York. Our global network means that our relationship with companies at a headquarters level can be replicated at a local country level.
Increasingly multinationals are establishing regional treasury centres in Europe so our teams here can work with a Regional Finance Director or Regional Treasurer to make sure we meet their needs here, leveraging platforms such as HSBCnet.
Our global presence and network of International Subsidiary Banking teams throughout Europe means we are well placed to support businesses as they look to rationalise their regional treasury functions. We offer a consultative approach to help streamline and consolidate companies’ banking and treasury needs, giving them greater visibility and control.
¹ EY’s attractiveness survey Europe 2015
2 European Commission figures: http://ec.europa.eu/trade/policy/eu-position-in-world-trade/index_en.htm
3 World Bank GDP rankings for 2014, accessed February 2016: http://databank.worldbank.org/data/download/GDP.pdf
4 European Economics Quarterly, January 2016: https://research.uk.hibm.hsbc/R/10/GKjwjnTUs8S0
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