Inward foreign affiliates statistics


Data extracted in May-June 2017

Planned article update: September 2019

Highlights

In 2014, foreign-controlled enterprises accounted for just 1.2 % of the 21.9 million enterprises that were active within the EU's non-financial business economy.

In 2014, at least one tenth of the total value added in the non-financial business economies of each EU country was generated by foreign-controlled enterprises.

Tobacco products and pharmaceuticals were the only activities where more than half of the EU’s value added in 2014 was generated by foreign-controlled enterprises.

Share of foreign-controlled enterprises, non-financial business economy, 2014
(% of total)
Source: Eurostat (fats_g1a_08)


Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

Structural business statistics on inward foreign affiliates provide information that may be used to measure the impact of globalisation, for example, through indicators covering turnover (sales), employment, productivity or innovation performance. The statistics presented in this article concern activities within the non-financial business economy, as defined by NACE Sections B-N (except Section K) and Division 95.

Statistics on foreign affiliates

For statistical purposes, foreign affiliates are considered to be enterprises resident in one country which are controlled by a unit resident in another. There are two distinct sources of information: so-called inward FATS which cover the activities of enterprises in 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 ability to determine the general policy of an enterprise by choosing, for example, appropriate directors. In practice, control is often difficult to determine and so the share of ownership is often used as a proxy; thus, an enterprise is said to be controlled by an institutional unit when the latter (a single investor or group of associated investors acting in concert) owns — directly or indirectly — more than half of its voting power or ordinary shares.

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Foreign-controlled enterprises in EU-28

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

In 2014, foreign-controlled enterprises accounted for just 1.2 % of the 21.9 million enterprises that were active within the EU-28’s non-financial business economy. Approximately twice as many of these were ultimately controlled by a unit from one of the other EU Member States (0.8 % of the total enterprise population), when compared with the 0.4 % that were 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 and the United Kingdom 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 2014, foreign-controlled enterprises provided work to almost one in six (15.3 %) persons that were employed within the EU-28’s non-financial business economy; their share of total value added was considerably higher, as foreign-controlled enterprises contributed almost one quarter (24.3 %) of the EU-28 total.

In 2014, non-member countries controlled more than half of the foreign enterprises in Slovenia and the United Kingdom

In 2014, almost three tenths (29.8 %) of all enterprises in the non-financial business economy in Luxembourg and nearly a quarter (24.8 %) of the enterprise population in Estonia were foreign-controlled; these shares were considerably higher than in any of the other Member States, as the next highest share was in Poland (9.5 %). At the other end of the range, the share of foreign-controlled enterprises in the total enterprise population was less than 1.0 % in Slovakia, France, Portugal, Cyprus, Malta, Spain, Greece, Italy and Belgium, where the lowest share was recorded (0.2 %).

More than four fifths of the foreign-controlled enterprises in Slovakia (87.9 %), Greece (80.8 %) and Estonia (80.1 %) were ultimately controlled by a unit from one of the other EU Member States in 2014. At the other end of the range, approximately half of the foreign-controlled enterprises in Ireland (48.9 %) and Slovenia (52.1 %) were controlled by a unit from a country outside the EU, a share that rose to almost three fifths (58.5 %) in the United Kingdom.

In 2014, almost two fifths of the non-financial business economy workforces of Luxembourg and Estonia were employed by a foreign-controlled enterprise

As seen for the number of enterprises, Luxembourg recorded the highest share — among the EU Member States in 2014 — of its non-financial business economy workforce employed by foreign-controlled enterprises (39.4 %); note also that there is a sizeable financial services sector in Luxembourg and that this too is characterised by a strong international presence. Estonia also had a high share (38.4 %) of its non-financial business economy workforce employed by foreign-controlled enterprises (see Figure 1).

Otherwise, there were six EU Member States in 2014 where foreign-controlled enterprises accounted for just over a quarter of the non-financial business economy workforce — Poland, Romania, the Czech Republic, Hungary, Slovakia and Ireland — several of these were often 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.

Ireland and the United Kingdom were the only EU Member States where a majority of those working for foreign-controlled enterprises in 2014 were employed by an enterprise that was controlled from outside the EU.

Foreign-controlled enterprises and value added

Foreign-controlled enterprises generated more than half of the value added in the Irish and Hungarian non-financial business economies in 2014

In 2014, at least one tenth of the total value added in the non-financial business economies of each of the EU Member States was generated by foreign-controlled enterprises. Relatively low shares were recorded in Cyprus (11.2 %), Greece (12.0 %), Italy (14.7 %) and France (16.1 %), while half of the Member States had shares within the range of 20-30 %. In Latvia, Bulgaria and Poland around one third of total value added was generated by foreign-controlled enterprises, a share that rose to over two fifths in Estonia, the Czech Republic, Slovakia and Romania. In keeping with the analysis of the number of enterprises and persons employed, foreign-controlled enterprises accounted for a high share (47.0 %) of total value added in the non-financial business economy of Luxembourg, rising to more than half of the total in Hungary (52.7 %) and Ireland (53.1 %).

Figure 1: Share of foreign-controlled enterprises, non-financial business economy, 2014
(% of total)
Source: Eurostat (fats_g1a_08)

Some 13.3 % of the total value added generated in the EU-28’s non-financial business economy in 2014 could be attributed to enterprises ultimately controlled by units from other EU Member States

Figure 2 shows a split between the contributions of foreign-controlled enterprises from other EU Member States (intra-EU) and foreign-controlled enterprises from countries outside the EU (extra-EU) to the generation of total value added in the non-financial business economy. Across the whole of the EU-28, almost one quarter (24.3 %) of total value added was generated by foreign-controlled enterprises; a slightly higher share (13.3 %) came from enterprises whose ultimate control lay in other EU Member States, while the share for enterprises whose ultimate control lay outside the EU was 11.0 %; the remaining 75.7 % of total value added was generated by enterprises controlled from within the domestic economy.

In Croatia, Romania, Slovakia and Estonia, more than three quarters of the value added generated by foreign-controlled enterprises could be attributed to those enterprises whose ultimate control lay in other EU Member States. By contrast, there were only two Member States — Ireland (81.9 %) and the United Kingdom (60.2 %) — where a majority of the value added created by foreign-controlled enterprises was generated by enterprises whose ultimate control lay outside the EU.

Figure 2: Share of foreign-controlled enterprises in total value added, non-financial business economy, 2014
(%)
Source: Eurostat (fats_g1a_08)

In 2014, German foreign affiliates accounted for more than one fifth of the total value added generated by EU-28 enterprises that were ultimately controlled by units from other EU Member States

The information presented so far has already underlined the relatively strong ties that exist in terms of the establishment of foreign affiliates between EU Member States, in other words, within the single market. In 2014, the total value added generated in the EU-28’s non-financial business economy by enterprises that were ultimately controlled by units from other EU Member States was EUR 870 billion (this was EUR 150 billion higher than the value added created by enterprises that were ultimately controlled by units from outside the EU).

More than one fifth (20.5 %) of the total value added generated by enterprises that were ultimately controlled by units from other EU Member States could be attributed to enterprises controlled by units from Germany, while the next highest shares were recorded for affiliates that were ultimately controlled by units from France (17.9 %), the Netherlands (12.8 %) and the United Kingdom (12.0 %). It is interesting to note that these French, Dutch and British foreign affiliates accounted for a higher share of the total value added that was generated than their corresponding shares of employment, while the opposite was true for German foreign affiliates (see Figure 3).

Figure 3: Intra-EU foreign control of enterprises within the non-financial business economy, EU-28, 2014
(% of intra-EU total)
Source: Eurostat (fats_g1b_08)

In 2014, the total value added generated in the EU-28’s non-financial business economy by enterprises controlled by units from outside the EU was EUR 720 billion. Of this, more than half (53.9 %) could be attributed to enterprises that were ultimately controlled by units located in the United States, while Switzerland (13.1 %) was the only other country to record a double-digit share; the next highest shares (both 7.7 %) were recorded for enterprises whose ultimate control was located in Japan or in offshore financial centres [1] — see Figure 4.

EU-28 workforce and foreign-controlled enterprises

In 2014, American-controlled enterprises accounted for almost half (47.4 %) of the EU-28 workforce employed by enterprises that were ultimately controlled by units from outside the EU. Swiss foreign affiliates accounted for the second highest share (15.8 %) of the EU-28’s non-financial business economy workforce employed by foreign-controlled enterprises whose ultimate control lay outside the EU, while the third highest share (9.3 %) was recorded by offshore financial centres.

Figure 4: Extra-EU foreign control of enterprises within the non-financial business economy, EU-28, 2014
(% of extra-EU total)
Source: Eurostat (fats_g1b_08)

Foreign-controlled enterprises by economic activity

Tobacco products and pharmaceuticals were the only activities where more than half of the EU-28’s value added in 2014 was generated by foreign-controlled enterprises

Figure 5 analyses the role that foreign affiliates play across different economic activities within the EU-28’s non-financial business economy. It shows that in 2014 the presence of foreign affiliates was often relatively high in areas characterised by oligopolies (for example, tobacco products), or high-technology manufacturing and knowledge-intensive services, such as pharmaceuticals, chemicals and motor vehicles or information services, scientific research and development. By contrast, the presence of foreign-controlled enterprises was often much lower in construction and a number of (regulated) services, for example, only 3.1 % of the total value added generated by legal and accounting activities in the EU-28 was attributed to foreign-controlled enterprises.

Figure 5: Share of value added for selected economic activities, by control of enterprise, EU-28, 2014
(% of total value added)
Source: Eurostat (fats_g1a_08)

Table 1 presents an analysis for some of the activities where foreign affiliates were most prominent. In 2014, among the foreign-controlled enterprises whose ultimate control was located outside the EU, the highest share of the workforce was almost exclusively accounted for by enterprises that were ultimately controlled by units from the United States; the only exception was for air transport services where a higher share of the workforce was employed by enterprises ultimately controlled by units from offshore financial centres.

EU-28 enterprises that were ultimately controlled by units from Switzerland were often specialised in activities such as chemicals, pharmaceuticals or scientific research and development, while EU-28 enterprises that were ultimately controlled by units from Japan were often relatively specialised in the manufacture of beverages, tobacco products and motor vehicles.

Table 1: Share of employment among extra-EU foreign-controlled enterprises for selected economic activities, EU-28, 2014
Source: Eurostat (fats_g1a_08)

Foreign-controlled enterprises: intra-mural expenditure

More than one third of the expenditure on intra-mural R & D that took place within the EU’s industry and construction sectors in 2013 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 2013, foreign-controlled enterprises accounted for just over one third (33.9 %) of intra-mural R & D expenditure within the industrial and construction sectors (NACE Sections B-F) of 16 EU Member States (see Figure 6 for data availability), and an almost identical share (34.3 %) of the total number of R & D personnel (see Figure 7). To put these figures into context, approximately one quarter of the value added that was generated within industry and construction for the same 16 Member States was attributed to foreign-controlled enterprises, while their share of the industry and construction workforce was approximately 18 %.

In Romania, the United Kingdom, the Czech Republic, Hungary and Austria, more than half of the expenditure on intra-mural R & D that took place in industry and construction in 2013 was accounted for by foreign-controlled enterprises, while in three of these EU Member States — Romania, the Czech Republic and the United Kingdom — a majority of R & D personnel also worked for a foreign-controlled enterprise.

Figure 6: Intra-mural R & D expenditure in industry and construction, by control of enterprise, 2013
(% of total)
Source: Eurostat (fats_g1a_rd)


Figure 7: R & D personnel in industry and construction, by control of enterprise, 2013
(% of total)
Source: Eurostat (fats_g1a_rd)

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Notes

  1. The full list of offshore financial centres includes: Andorra, Antigua and Barbuda, Anguilla, Aruba, Barbados, Bahrain, Bermuda, Bahamas, Belize, Cook Islands, Curaçao, Dominica, Grenada, Guernsey, Gibraltar, Hong Kong, Isle of Man, Jersey, St Kitts and Nevis, Cayman Islands, Lebanon, Saint Lucia, Liechtenstein, Liberia, Marshall Islands, Montserrat, Mauritius, Nauru, Niue, Panama, Philippines, Seychelles, Singapore, Sint Maarten, Turks and Caicos Islands, Saint Vincent and the Grenadines, British Virgin Islands, US Virgin Islands, Vanuatu, Samoa. For the purpose of this publication, information for Hong Kong and Singapore is shown separately and hence these two countries are generally excluded from the offshore financial centres aggregate (unless otherwise specified).