Investment in France and the EU

Transcription

1 Investment in and the EU Natacha Valla March /02/2017 1

2 Change relative to 2008Q1 % of GDP Slow recovery of investment, and with strong heterogeneity Overall Europe s recovery in investment is slow, especially for the countries that were hit most by the crisis as well as new Member states In, investment has remained relatively robust during the crisis but is still 5% below the 2008 level Investment (% change relative 2008 Q1) 1 25% Investment, by asset class 2016 Q2 (% of GDP) -1 15% % FR Core Periphery Cohesion Core Periphery Cohesion DE IT FR Dwellings Other buildings and structures IPP Machinery and equipment Source: EIB, based on National Accounts and Eurostat 22/02/2017 European Investment Bank Group 2

3 Corporate investment is recovering gradually At the EU level, corporate investment has been the main driver of the (slow) investment recovery Especially in, where corporate investment is driven by machinery and transport equipment investment and IPP Real GFCF by institutional sector (2008 = 100) Households Government EU Financial Institutions Corporations Total Source: EIB, based on National Accounts and Eurostat 22/02/2017 European Investment Bank Group 3

4 % of GDP % of GDP but infrastructure investment is falling, in the EU and EU infrastructure investment fell from its peak of 2.2% of GDP in 2009 to 1.6% in 2015 Public investment accounts for most of the decline, affected by fiscal space and EU funds In, public infrastructure investment (of which almost 7 is done at the local government level) remains above the EU average But French corporate infrastructure investment is very low (around 0.15% of GDP) Infrastructure investment (% of GDP) EU28 Government Corporate PPP Non-PPP Project Government Corporate PPP Non-PPP Project 2,5 2, ,5 1, ,5 0, Source: EIB, based on National Accounts, Eurostat and AMECO 22/02/2017 European Investment Bank Group 4

5 % GDP Government infrastructure investment impacted by the fiscal stance 2,5 2,0 1,5 EU infrastructure investment, % GDP Contribution to change in government expenditure , % GDP Other GFCF Total 1,0 0,5 0, Public investment rate in Cohesion, % GDP 6% 4% 2% Project finance - non PPP PPP Corporate Government Source: EIB, based on National Accounts, Eurostat and AMECO Public investment (without ESIF payments) Public investment 5

6 Investment returns are low Nominal internal rates of return on assets Core Periphery Cohesion Source: EIB calculation of nominal rates of return, based on firm level data from ORBIS. Barriers to investment as from preliminary results of the EIB Investment survey for 28 EU member states, data weighted by value added 6

7 EIB Investment Survey (EIBIS) Some 12,500 firms in the 28 EU member states (602 firms in ) Survey of non-financial corporate sector (firms with 5+ employees) Covering manufacturing, services, construction and infrastructure sector Qualitative and quantitative information on: firm characteristics and performance past investment activities and future plans sources of finance and challenges that businesses face Representative of the economy (firms weighted by value-added) at the level of: EU28 each EU member state (separately) 4 industry groups (within each member state for most countries) and 4 size classes (within each member state for most countries) Annual survey for an initial period of 3 years (panel plus cross-section) 22/02/2017 European Investment Bank Group 7

8 EU Manufacturing Construction Services Infrastructure SME Large EU Manufacturing Construction Services Infrastructure SME Large High share of investment in intangibles in, driven by firm training (highest share in the EU) Investment activity last year Investment areas Share of firms investing (blue bar) 93% 84% 85% 74% Investment intensity (red diamond) 93% 87% % 76% Organisation/ business processes Training of employees Software, data, IT, website 4 % R&D Machinery and equipment Land, business buildings and infrastructure Base: All firms (excluding don t know/refused responses) *The green bars indicate the proportion of firms who have invested in the last financial year. A firm is considered to have invested if it spent at least EUR 500 per employee on investment activities. Investment intensity is the median investment per employee of investing firms. Base: All firms that invested in the last financial year (excluding don t know/refused responses) Q. In the last financial year, how much did your business invest in each of the following with the intention of maintaining or increasing your company s future earnings? 22/02/2017 European Investment Bank Group 8

9 Firms expecting to increase/decrease investment in current financial year (net balance, %) Many firms are investing and are expecting to increase investment this year (except in the construction sector) Investment cycle by country 25% 15% 1 5% -5% CY Low investment expanding HU PT MT PL SK ES IT UK EE HR FR EU DE AT NL CZ BE LU IE SI SE High investment expanding DK FI -1 LT -15% - Low investment contracting High investment contracting -25% 7 75% 8 85% 9 95% 10 Share of firms investing 22/02/2017 European Investment Bank Group 9

10 Luxembourg Malta Austria Estonia Romania Denmark Portugal Poland Germany Netherlands UK Cyprus Hungary Czech Rep Ireland Bulgaria Croatia Slovakia Belgium Italy Slovenia Sweden Spain Finland Greece Latvia Lithuania Manufacturing Construction Services Infrastructure SME Large Only 4 of the firms are operating at or above maximum capacity in, below the EU average of 51% Share of firms at or above full capacity Share of firms at or above full capacity in At or above capacity EU average 4 4 % % Base: All firms (data not shown for those operating somewhat or substantially below full capacity) Full capacity is the maximum capacity attainable under normal conditions e.g., company s general practices regarding the utilization of machines and equipment, overtime, work shifts, holidays etc. Q. In the last financial year, was your company operating above or at maximum capacity attainable under normal circumstances? 10

11 Germany Austria Hungary Malta Slovenia Italy Spain Netherlands Luxembourg Estonia Latvia Belgium Ireland Denmark Croatia Slovakia Portugal Finland Czech Rep Romania Sweden Lithuania UK Poland Bulgaria Malta Spain Austria Germany Italy Slovakia Ireland Hungary Croatia Netherlands Slovenia Bulgaria Denmark Belgium Latvia UK Romania Estonia Luxembourg Sweden Portugal Czech Rep Finland Poland Lithuania Low shares of machinery and equipment considered to be state-of-the-art in and of buildings meeting high energy efficiency standards 10 Average share of state-of-the-art machinery and equipment 10 Average share of building stock meeting high energy efficiency standards % % Base: All firms Q. What proportion, if any, of your machinery and equipment, including ICT, would you say is state-of-the-art? Data not shown for Greece and Cyprus, as the Greek translation may have influenced interpretation of the question. This will be addressed in the next round of interviews. Base: All firms Q. What proportion, if any, of your commercial building stock satisfies high or highest energy efficiency standards? Data not shown for Greece and Cyprus, as the Greek translation may have influenced interpretation of the question. This will be addressed in the next round of interviews. 22/02/2017 European Investment Bank Group 11

12 Slovakia Croatia Spain Bulgaria Romania Ireland Czech Rep Malta Greece Sweden UK Latvia Belgium Hungary Netherlands Italy Austria Denmark Poland Cyprus Lithuania Germany Portugal Slovenia Finland Luxembourg Estonia EU Manufacturing Construction Services Infrastructure SME Large Last year, over half of investment spending was for replacement purposes, and investment for capacity expansion is low in (18%), while 19% of investment went into developing new products and services Purpose of investment last year Purpose of investment last year in Capacity expansion Replacement New products/services Other Capacity expansion Replacement New products/services Other Base: All firms that invested in the last financial year (excluding don t know/refused responses) Q. What proportion of total investment was for (a) replacing existing buildings, machinery, equipment, IT (b) expanding capacity for existing products/services (c) developing or introducing new products, processes, services? 12

13 French firms (6%) less likely than in the EU (1) to report that they developed products and services that are new to the global market 10 Investment in new products, process or services that are new to the company, new to the country or new to the global market? CZ DK FI IT SK ES UK HR PL IE SE CY BE HU NL PT DE FR MT LU LV LT RO BG EL SI AT EE Did not invest in new products New to the company New to the country New to the global market Base: All firms that invested in the last financial year (excluding don t know/refused responses) Q. Were the new products, process or services (a) new to the company; (b) new to the country; (c) new to the global market? 22/02/2017 European Investment Bank Group 13

14 Croatia Romania Denmark Slovakia Netherlands Cyprus Czech Rep Poland UK Germany Austria Latvia Greece Lithuania Sweden Bulgaria Spain Hungary Estonia Luxembourg Italy Slovenia Belgium Ireland Malta Finland Portugal EU Manufacturing Construction Services Infrastructure SME Large Looking ahead, investment in new products, processes and services is the most commonly cited priority in (39% of the firms, highest share in the EU), whereas capacity expansion is a priority for only 14% of the firms Future investment priorities Future investment priorities in Capacity expansion New products/services Replacement No investment planned Capacity expansion New products/services Replacement No investment planned Base: All firms (excluding don t know/refused responses) Q. Looking ahead to the next 3 years, which of the following is your investment priority (a) replacing existing buildings, machinery, equipment, IT (b) expanding capacity for existing products/services (c) developing or introducing new products, processes, services? 14

15 Uncertainty about the future and labour market regulations are perceived as the main long term barriers to investment Long term barriers to investment Uncertainty about the future Availability of finance Adequate transport infrastructure Business regulations Labour market regulations Access to digital infrastructure Energy costs Availability of staff with right skills Demand for products or services FR EU Uncertainty about the future and labour market regulations are perceived as stronger obstacles in than in the EU The (lack of) availability of staff with the right skills, and business regulations and taxation, also stand out as important barriers to investment in A major obstacle A minor obstacle Base: All firms (data not shown for those who said not an obstacle at all/don t know/refused) Q. Thinking about your investment activities in, to what extent is each of the following an obstacle? Is a major obstacle, a minor obstacle or not an obstacle at all? These obstacles are perceived as particularly strong for French firms in the services sector 22/02/2017 European Investment Bank Group 15

16 manufacturing construction services infrastructure manufacturing construction services infrastructure French firms in construction and manufacturing are well represented at the EU productivity frontier 1 8% Firms at the EU productivity frontier EU productivity frontier identified as the top 5% firms in the TFP distribution for each 8 NACE subsectors covered by EIBIS 6% 4% Only around 4% of French firms at the EU productivity frontier 2% Firms in in construction and manufacturing are well represented at the EU productivity frontier Unweighted percentage of firms Weighted by value added EU FR Base: All firms with an estimate of TFP but very few firms in at the EU productivity frontier in services and infrastructure (no French firms at the frontier for the utilities sectors) 16

17 Manufacturing Construction Services Infrastructure SME Large Low investment abroad for infrastructure and large firms 5 4 Investment in another country Investment abroad EU average Only 9% of the firms in invested abroad in 2015, close to the EU average of 12% 3 1 % Investment in another country is low in the infrastructure sector, where only 4% of the firms in (EU average is 1) Base: All firms that invested in the last financial year Q. In the last financial year, has your company invested in another country? 13% of large firms in have invested abroad, compared to the EU average of 18% 17

18 In, the most productive firms (top of the TFP distribution) generate 31% of employment, compared to a share of 25% in the EU Employment share by quintiles of the TFP distribution in the EU and But firms in with low productivity (e.g. bottom 4 of the TFP distribution) generate 43% of employment unlike in the EU as a whole, where firms with low productivity represent less than 25% of employment 1 EU FR EU FR Unweighted percentage of firms Weighted by value added 1st quintile 2nd quintile 3rd quintile 4th quintile 5th quintile This may suggest an inefficient allocation of labour in, with many people working in firms that are not very productive Base: All firms with an estimate of TFP 22/02/2017 European Investment Bank Group 18

19 Low productivity firms represent a larger share of total investment in than in the EU 10 8 Share of investment by quintiles of the TFP distribution in the EU and The most productive firms (top of the TFP distribution) generate 31% of total investment in, compared to a share of 36% in the EU 6 4 and, unlike in the EU as a whole, firms in with low productivity (bottom 4 of the TFP distribution) represent more than 4 of total investment EU FR EU FR Unweighted percentage of firms Weighted by value added 1st quintile 2nd quintile 3rd quintile 4th quintile 5th quintile Base: All firms with an estimate of TFP and that invested in the last financial year (excluding don t know/refused responses) Again possibly suggesting an inefficient allocation of resources 22/02/2017 European Investment Bank Group 19

20 EU Manufacturing Construction Services Infrastructure SME Large* Firms in report the highest share of external finance in the EU Source of investment finance Firms report the highest share of external finance in the EU (53% in ; EU average is 36%) and the lowest share of internal finance (44% in ; EU average is 6) in a context of weak profit margins that may limit the capacity of self-financing. External Internal Intra-group Base: All firms (data not shown for those who said not an obstacle at all/don t know/refused) Q. Thinking about your investment activities in, to what extent is each of the following an obstacle? Is a major obstacle, a minor obstacle or not an obstacle at all? Bank loans are the most common source of external finance 22/02/2017 European Investment Bank Group 20

21 Firms in are mostly satisfied with external finance but collateral requirement can be a problem for certain firms 10 Satisfaction with external finance FR EU FR EU FR EU FR EU FR EU Amount obtained Cost of finance Maturity Collateral Type of finance Very satisfied Fairly satisfied Neither Fairly dissatisfied Very dissatisfied Base: All firms that used external finance in the last financial year (excluding don t know/refused responses Q. How satisfied or dissatisfied are you with? 22/02/2017 European Investment Bank Group 21

22 Portugal Cyprus Greece Malta Bulgaria Croatia Hungary Ireland Romania Lithuania Slovenia Latvia Italy Netherlands Slovakia Spain Austria Belgium Germany UK Denmark Estonia Poland Finland Czech Rep Luxembourg Sweden Only 5% of firms in consider themselves to be credit constrained, but firms in services and SMEs are more likely to be finance constrained Share of finance constrained firms Share of finance constrained firms in EU 15% Manufacturing 1 Construction Services 5% Infrastructure SME Large* 4% 8% 12% 16% Rejected Received less Too expensive Discouraged Rejected Received less Too expensive Discouraged Base: All firms Finance constrained firms include: those dissatisfied with the amount of finance obtained (received less), firms that sought external finance but did not receive it (rejected) and those who did not seek external finance because they thought borrowing costs would be too high (too expensive) or they would be turned down (discouraged) 22/02/2017 European Investment Bank Group 22

23 Key messages for discussion (1) In, investment has remained relatively robust during the crisis (compared to many EU countries) but is still 5% below the 2008 level Public infrastructure investment (of which almost 7 is done at the local government level) remains above the EU average but has been falling in recent years and private infrastructure investment is very low Policy implications: crucial to put in place a system in place for coordinating and relaunching infrastructure investment at different levels of the economy (public, local government, private sector) 22/02/2017 European Investment Bank Group 23

24 Key messages for discussion (2) Uncertainty about the future and labour market regulations perceived as the main long term barriers to investment in the private sector Firms that are not productive generate a large share of employment and investment in, compared to the EU as whole Policy implications: Need for more predictive public policies and a more efficient reallocation of resources (with less protection for firms that are not productive) Firms in report the highest share of external finance, in a context of weak profit margins that may limit the capacity of self-financing They are mostly satisfied with the conditions for external finance but collateral requirement can be a problem for certain firms in Policy implications: Target interventions to improve conditions for investment finance and innovation in particular for SMEs, firms in services and firms that invest in intangibles 22/02/2017 European Investment Bank Group 24

25 Policy messages Differences among countries call for a differentiated approach Financial sector: Further efforts to restructure the banking sector and create a full banking union Focus on diversification of financial sources New options for more equity financing i.e. level playing field equity vs debt Public Sector: Potential growth and TFP Structural reforms to boost returns on investment A case for stronger and better defined industrial policies? Quality of spending Institutional capacity National, regional, municipal coordination Catalytic instruments 25

26 Policy messages Public support to investment: Focus on productive investment (with impact on TFP) Quality infrastructure, supporting market integration Innovation Access to Finance Climate Cross-European instruments to facilitate efficient reallocation of excessive domestic savings, even intra- EU Equity, other than debt: level playing field for private equity, lower barriers for firms to listing and issuing in capital markets Advisory and technical assistance 26

27 Policy messages additional views DG EcFin: not much fiscal space but more quality investment and EFSI 2 OECD: use fiscal space to support quality investment and structural reforms (and put EFSI co-financing out of the fiscal rules) IMF: fiscal stabilizer for EMU based on investment and focus on advancement of the banking union! Others: diffusion of innovation and more equity financing 27