Publication of the 8th Global Industrial Investment Barometer

For its ^8th edition, Trendeo, Fives, theInstitut de la réindustrialisation and McKinsey have joined forces to unveil the findings of the Global Industrial Investment Barometer 2023. Since 2016, this barometer has been measuring investment trends on an international scale, both in existing industrial facilities and in new production units. It also identifies projects and achievements that contribute to the development of the "factory of the future", based on technological and societal criteria: flexibility, digitization, energy efficiency, environmental protection, integration into the local economy and social conditions.

Key findings include

• Worldwide investment volumes stabilized at $1,306 billion;
• Despite low volumes, we can observe a virtuous investment logic in Europe, with specific measures to protect the environment, reduce energy consumption and use digital technologies;
• In fact, 54% of global investments are directed towards Asia, 28% towards America and only 10% towards Europe.

" Our 2023 study shows that Europe is lagging behind in terms of volume, but is undeniably ahead in terms of investment quality. This outlines a desirable path in which, without wavering on quality and in particular investment consideration, Europe must increase its investment volumes. " David Cousquer, CEO and founder of Trendeo.

Worldwide investment volumes stabilized over the past 12 months, with marked regional disparities

By 2022, industrial investment had fallen sharply (by around
20% compared with the first half of 2021), partly due to the consequences of the Russian-Ukrainian conflict. Over the past 12 months, however, the volume of investment has stabilized at $1,306 billion. Industrial investment even picked up slightly (+5%), with volumes close to those of 2021, confirming the post-Covid recovery, although there was a 15% drop between the second quarter of 2022 and the first quarter of 2023.

However, these consolidated figures mask significant regional disparities. Indeed, 54% of investments are directed towards Asia, with significant growth in investments in South Korea and Indonesia (+2,118% and +211% respectively) and a sharp drop in investments in China. Although it accounts for around 30% of investment in the Asia zone, investment in China is down 28% on the last edition of the barometer. The country, which had already been experiencing a sharp drop in foreign investment since 2020, is struggling to get back on track, with investments approaching $210 billion a year, down 16% on the annual average since 2016.

The second region to benefit from global industrial investment is America (28%), and mainly the United States (over 80% of investment in the zone), which is likely to benefit from the initial effects of the IRA.

Enlarged Europe, meanwhile, is down slightly, draining around 10% of global investments compared with an average of 12% over the 2016-2023 period. Looking more specifically at the European Union, the figure is stable at 7%, as it was last year. The difference in investment in the enlarged Union compared with the previous period can be explained in part by the United Kingdom and Russia dropping out.

A clear upturn in manufacturing investment

With 900 billion of investment from July 2022 to June 2023, manufacturing investment is up 10% over the last twelve months, 27% above its annual average since 2016.

Investment in power generation was down 10%, particularly in renewable energies, with the disappearance of investment in offshore wind power and a sharp drop in fossil fuels. Batteries are also down slightly, but well above their average. Conversely, investment in solar power and hydrogen production has risen.

Investments in data centers (+72%), waste management activities (+99%) and R&D (+509%) are all up sharply.

" The conclusions of the Trendeo study, like our record order book of €2.3MM at the end of 2022, can be explained by the clear inflection of trends that I've seen coming since 2018: decarbonization, digitalization, automation, regionalization. Fives is benefiting from strong investment growth in North America, with major automation projects in particular. In China, the Group is supporting an industry increasingly focused on decarbonization. In Europe, where there are fewer major new projects, Fives is promoting the transformation of the existing industrial fabric towards a more virtuous model "
Frédéric Sanchez, Chairman of Fives.

Despite low volumes, high quality of investments in Europe

European investment in industry is 40% lower than the world average ($276 million per project in the European Union versus $470 million worldwide). Nevertheless, the European Union has a strong domestic investment capacity and a virtuous investment strategy.

Far ahead of other geographic zones, European investments announce specific environmental measures in 25% of projects (14% worldwide), as well as measures to reduce energy consumption in 11% of projects (6% worldwide). Also, 8% of investments specify the use of digital technologies, a percentage equivalent to that of the Americas.

In France more specifically, the "Factory of the Future" criteria are on the rise in 2023. In particular, they relate to efforts in favor of the environment, digitization and energy efficiency.

"The barometer demonstrates the European Union's virtuous investment logic, which is conducive to strengthening our industry of the future. This is excellent news. If we focus on France, we see an opportunity for industrial relocation, with major assets. Among them, major global champions feeding a very solid fabric and a dynamic of sectors, access to markets thanks to a very favorable geographic location, the quality of its infrastructures, its talent pool, the excellence of its research and innovation centers, or even the possibility of low-cost decarbonized energy thanks to its energy mix. All these elements fuel the power of the 'Label France'."
Matthieu Dussud, Associate Director at McKinsey France.

Efforts to decarbonize industry and energy production are continuing, particularly in the nuclear and air transport sectors.

As part of the 2023 barometer, observations have been detailed for two growing sectors, both linked to the decarbonization of the economy: SMRs and fuels for sustainable aviation. The nuclear microreactor sector is expanding, with a cumulative investment of around $35 billion since 2016. Recently, Sustainable Aviation Fuel (SAF) has also seen a period of growth. Investments in this field will reach a cumulative $12 billion by 2023.

Last but not least, some thirty industries have deployed projects for fully decarbonized production sites. Here again, the European Union is in first place for the quality of its decarbonization projects.

Social efforts, a major imperative

The barometer also analyzes the criterion of "social effort", which takes into account various themes such as local employment, salary levels and training efforts. This criterion reflects different realities in different countries. In India, projects place greater emphasis on the employment of women, while in the United States, subsidies for training highlight recruitment difficulties in short-staffed professions in a country where full employment reigns. In France, the reindustrialization dynamic is hampered by the availability of human resources.

"In France, recruitment tensions, and even shortages, are becoming a limiting factor in reindustrialization. The attractiveness of sectors, coupled with a high-performance training offer, are major challenges for industrial renewal. " Gwenael Guillemot, Director of the Institut de la réindustrialisation.