In June, global and national investment data updates from UNCTAD (the United Nations Conference on Trade and Development) and the Investment Registry are published. This information helps to consolidate preliminary information on last year’s events and gives us an idea of what can happen to FDI flows in 2022.
The recovery of international investment flows in 2021
According to UNCTAD, global investment flows recovered sharply in 2021 to $1.58 trillion (an increase of 64%), thus surpassing their pre-Covid-19 level. In the same year, Spain received 29.1 billion gross productive investment, 19.4% more than in 2020, a year in which, despite the pandemic, flows remained stable.
Early indicators for 2022, however, reveal a bleak picture for global FDI. UNCTAD’s report for the month of June reveals growing uncertainty and increasing risk aversion among investors, which have led to a drop of 21% in the announcement of new projects
Significant growth in investment in Spain and Madrid during the first quarter of 2022
In Spain, on the other hand, investment flows were above the average for the first quarters of the last decade, although the figures for the first quarter are not very indicative of what may happen throughout the year.
Thus, in the first quarter of 2022, Madrid received 4,709 million investments (69.5% of the total in Spain), according to preliminary figures from the Registry. However, these figures must be taken with due caution, due to calendar effects and the impact of certain specific one-off acquisitions.
Cross-border M&A and expansions drive the investment market
The good results in 2021 were largely due to the impact of cross-border Mergers & Acquisitions, which represented 52% of total flows. Expansions – investments made by companies already present in Madrid – accounted for 27%, while new investments, be it greenfield or brownfield, represented 21% of flows.
In the first quarter of 2022 expansions gained prominence, accounting for 74% of the flows, thanks mainly to reinvestments from British and North American businesses.
Investment flows come mainly from OECD countries
In 2021, five countries exceeded 1 billion in investments in Madrid: France -6,489 million, thanks to Vinci’s acquisition of Cobra-, the United States -3,330 million-, the United Kingdom -2,640 million, widely distributed by sector-, Australia -2,479 million, mostly IFM’s acquisition of a stake in Naturgy- and Japan -1,318, with some noteworthy operations such as the purchase of Elawan by Orix-.
The preliminary data for the first quarter of 2022 includes notable investments from the United Kingdom (2,259 million, of which 2 billion were linked to investments in LaLiga), the United States (1,115 million, mostly in Tile Manufacturing, Financial Services and Telecommunications) and Australia (384 million, with additional investments undertaken by IFM in the energy sector).
Excellent results for Madrid in terms of announcements of new investment projects
Private sources such as fDi Markets of the Financial Times also reported a strong recovery in 2021 in terms of attracting new projects. According to its latest data, 179 greenfield projects were announced in Madrid in 2021, 37% more than in 2020, when the number of projects and investment fell significantly. These projects brought in 3,994 million dollars in investments (second best record in the series) and the generation of 14,924 local jobs.
The pace of investment in the first months of 2022 did not seem to slow down. Between January and May, 76 projects were announced, with an associated investment of 2,150 million dollars and the generation of 7,779 jobs.
The capital has received 84% of the projects received in the Community since 2003, 73% of the investment and 71% of the announced employment. Madrid is also the third European city that has received the most greenfield projects since 2003, and the twelfth in the world.
The investment stock in Madrid accounts for 68% of the total FDI in Spain
Madrid has also led the recovery of employment levels linked to foreign investment in Spain, although the pandemic has slowed down the progression of recent years. At the end of 2020, the last year for which the Registry offers data on this variable, there were 512,915 workers in jobs linked to foreign investment in the Community of Madrid, the first decrease (-1.1%) since the lows of 2014. Madrid accounts for 30.2% of employment in foreign companies nationwide.
According to the most recent data, the foreign investment position increased 1.6% to 346,580 million euros, equivalent to 160% of regional GDP for the year. Madrid concentrates 68% of the FDI stock in Spain, almost 10 percentage points more than in 2007, well ahead of Catalonia (13%) or the Basque Country (3.9%).
The city of Madrid is home to more than 9,600 companies with foreign capital
In the last INE-FILINT update (September 2021) on foreign subsidiaries in Spain, only the new methodology, based on “Company” Statistical Units has been used, which does not allow for a regional analysis of the data. However, alternative sources such as SABI (Moody’s Analytics) estimate that there are more than 12,480 foreign capital companies in the region, 77% of them in the capital.