Foreign-controlled enterprises statistics - inward FATS

Data extracted in February 2024.

Planned article update: 21 November 2024.

Highlights

In 2021, 1.1 % of active EU market producers enterprises were foreign-controlled.

In 2021, at least one-seventh of the total value added of the EU market producers of each EU Member State was generated by enterprises that were foreign-controlled.

In 2021, the United States accounted for the largest share of the EU workforce employed by foreign affiliates in the EU that were ultimately controlled by residents from outside the EU.

Structural business statistics on inward foreign affiliates provide information that may be used to measure the impact of globalisation, for example, through indicators covering net turnover (sales), employment, productivity or innovation performance. The statistics presented in this article concern activities within the business market producers, as defined by NACE Sections B-S (except Section O and Division 94).

Statistics on foreign affiliates

For statistical purposes, foreign affiliates are considered to be enterprises resident in one country and controlled by a unit resident in another. There are two distinct sources of information: so-called inward FATS which cover the activities of enterprises within the EU that are under foreign control, and outward FATS which cover the activities of EU affiliates abroad.

The globalised economy is increasingly characterised by intricate business networks. As a result, it can be difficult to untangle these complicated and often blurred chains of control. To do so, statistics on foreign affiliates are compiled according to the ultimate controlling institutional unit (UCI) — determined by proceeding up a foreign affiliate's chain of control until there is no further controlling interest; by doing so, potential double-counting of the same affiliates (by several countries) can be avoided. In this context, control refers to the ownership of a controlling share of the shareholders' voting power and the ability to determine the general policy of an enterprise, for example by choosing appropriate directors. In this way, an enterprise is said to be controlled by an institutional unit when the latter (a single investor or a group of investors acting together) owns — directly or indirectly — more than half of the voting shares in the enterprise.

Full article

Foreign-controlled enterprises in the EU

One of the most striking aspects concerning foreign-controlled enterprises is their very small absolute number

In 2021, foreign-controlled enterprises accounted for just 1.1 % enterprises that were active within the EU's business market producers. About 60 % foreign-controlled enterprises were ultimately controlled by a unit from one of the other EU Member States compared with enterprises ultimately controlled by a unit from non-member countries. As such, geographical proximity would appear to be an important determining factor when foreign investors consider their options — perhaps reflecting some caution to first invest in nearby markets (which may also be culturally and/or linguistically close) before considering investments further afield (both geographically or culturally). Indeed, the attractiveness of different countries can often be linked to proximity, historical, cultural or linguistic ties with, for example, a high proportion of the foreign-controlled enterprises in Ireland are ultimately controlled by units from the United States.

The contribution of foreign-controlled enterprises to economic performance was much greater, both in terms of employment and, in particular, value added, than in terms of the number of enterprises. This may be explained, at least in part, by foreign-controlled enterprises generally being much larger in size than domestic (or nationally controlled) enterprises. In 2021, foreign-controlled enterprises provided work to almost one in seven (15.0 %) persons that were employed within the EU's business market producers; their share of total value added was considerably higher, as foreign-controlled enterprises contributed 22.5 % of the EU total.

In 2021, non-member countries controlled more than three-quarters of the foreign-controlled enterprises in Ireland

In 2021, three-tenths (29.2 %) of all enterprises in the business market producers in Luxembourg were foreign-controlled; this share was considerably higher than in any of the other Member States, as the next highest share was in Estonia (10.3 %). At the other end of the range, the share of foreign-controlled enterprises in the total enterprise population was less than 1.0 % in Belgium, Cyprus, France, Greece, Italy, the Netherlands, Portugal, Slovakia, Spain and Sweden where the lowest share was recorded (0.1 %).

In 2021, a significant majority of foreign-controlled enterprises in Greece (79.0%) and Slovakia (78.6%) were ultimately under the control of a unit from another EU Member State. At the other end of the range, almost three-quarters of the foreign-controlled enterprises in Ireland (73.9 %) and almost two-thirds of the foreign-controlled enterprises in Malta (57.1 %) were controlled by institutional units resident outside the EU.

In 2021, over two-fifths of the business market producers workforce of Luxembourg were employed by foreign-controlled enterprises

As seen for the number of enterprises, Luxembourg recorded the highest share in 2021 — among the EU Member States — of its business market producers workforce employed by foreign-controlled enterprises (43.8 %); note also that there is a sizeable financial services sector in Luxembourg and that this too is characterised by a strong international presence. Poland also had a high share (32.1 %) of its business market producers (see Figure 1).

Figure 1: Shares in enterprises of business market producers, 2021 (% of total)
Source: Eurostat (fats_activ)

There were further five EU Member States where foreign-controlled enterprises accounted for more than a quarter of the business market producers workforce in 2021 — Ireland (28.2 %), Czechia (27.9 %), Slovakia (27.2 %), Romania (26.6 %) and Estonia (25.2 %) — many characterised by relatively low wage costs and high numbers of people working for foreign-controlled enterprises in the manufacturing sector, often controlled by units from other Member States.

In a few countries, the majority of those working for foreign-controlled enterprises in 2021 were employed by an enterprise that was controlled from outside the EU, the largest share by far was employed in Ireland (79.4 %).

Foreign-controlled enterprises generated more than two-thirds of the value added for the Irish business market producers in 2021

In 2021, at least one-tenth of the total value added in the business market producers' economies of each of the EU Member States was generated by foreign-controlled enterprises. Relatively low shares were recorded in in France (14.7 %), Cyprus (15.6 %), Germany (16.7 %), Italy (16.9 %), the Netherlands (18.3 %) and Greece (19.7 %), while one-third of the Member States had shares within the range of 20-30 %. Eleven Member States had shares within the range of 30-55 % and in Ireland foreign-controlled enterprises accounted for more than two-thirds (71.9 %) of total value added in the Irish business market producers' 2021.

Foreign-controlled enterprises by economic activity

The United States accounted for the largest share of the EU workforce employed by foreign affiliates in the EU that were ultimately controlled by residents from outside the EU

Table 1 presents an analysis for some of the activities where foreign affiliates were most prominent. In 2021, among the foreign-controlled enterprises whose ultimate control was located outside the EU, the highest share of the workforce in these activities was almost exclusively accounted for by enterprises that were ultimately controlled by units from the United States. The three exceptions were manufacture of wood, paper, printing and reproduction, manufacture of coke and refined petroleum products and manufacture of electrical equipment where a higher share of the workforce was employed by enterprises ultimately controlled by units from the United Kingdom and Switzerland, respectively, in all three cases followed by the United States in second place. For most of these activities with a high contribution of value added from foreign affiliates, the United Kingdom was often the second most common location of control outside of the EU. Switzerland placed in the top three locations for most activities, the exceptions being manufacture of coke and refined petroleum products and manufacture of motor vehicles, trailers, semi-trailers and of other transport equipment. Japan, China and Russia also figured in the top three, taking second and third place for the manufacture of motor vehicles and Japan being third in Manufacture of electrical equipment.

Table 1: Share of employment among extra-EU foreign-controlled enterprises for selected economic activities, EU, 2021
Source: Eurostat (fats_activ)

Foreign-controlled enterprises: intra-mural R & D expenditure

Over one-quarter of the expenditure on intra-mural R & D that took place within the EU's industry and construction sectors in 2021 was accounted for by foreign-controlled enterprises

Although corporate research and development (R & D) activities often remain highly concentrated close to headquarters of multinational enterprises, there is some evidence to suggest that foreign-controlled enterprises in the EU may be more R & D intensive than their nationally-owned competitors. Indeed, foreign-controlled enterprises are seen as an integral part of some national innovation systems, as the research activities of large multinationals can potentially benefit host nations by promoting knowledge and technology transfers.

In 2021, foreign-controlled enterprises accounted for over one-quarter (25.3 %) of intra-mural R & D expenditure within the industrial and construction sectors (NACE Sections B-F) of 16 EU Member States (see Figure 2 for data availability), and a slightly higher share (27.6 %) of the total number of R & D personnel (15 Member States; see Figure 3).

Figure 2: Intra-mural R & D expenditure in industry and construction, by control of enterprise, 2021
(% of total)
Source: Eurostat (fats_activ_rd)

In Czechia, Greece, Ireland, Luxembourg, Romania, Slovakia and Sweden more than half of the expenditure on intra-mural R & D that took place in industry and construction in 2021 was accounted for by foreign-controlled enterprises, as well as the majority of R & D personnel in those countries worked for a foreign-controlled enterprise.

Figure 3: R & D personnel in industry and construction, by control of enterprise, 2021
(% of total)
Source: Eurostat (fats_activ_rd)

Source data for tables and figures (MS Excel)

Inward foreign affiliates statistics: tables and figures