Slovenia could become a hub for British companies after Brexit

Slovenia could become a hub for British companies after Brexit
Slovenia could become a hub for British companies after Brexit
  20.11.2017  |  11:11
Čas branja: 8 min
How attractive is Slovenia for foreign investments?

The region of Prekmurje is located in the north-eastern part of Slovenia, along the border with Austria and Hungary. This tourist gem of Slovenia is known for the stories which a couple of hundred British buyers wrote by buying local property before the economic crisis in 2008, but the fact that Prekmurje is the location of the largest British investment in Slovenia is a little less known.

Natural gas has been extracted in Prekmurje for the past 70 years. Ascent Resources, a British independent oil and gas exploration company, saw the opportunity and started extracting gas in the spring from the new drill site in Petišovci close to the Slovenian-Hungarian border. According to some estimates, there are 11.7 billion cubic metres of natural gas beneath Petišovci.

Multinational companies are relocating production to Slovenia

The arrival of the British investor Ascent Resources is a positive example of Slovenia and its availability for complex investments which are, as in the case of Petišovci, related to long-term investment in research and development. Since entering the European Union (EU), Slovenia has become an increasingly globalised economy and open to foreign capital. Information from 2015 shows that foreign investments are now over 11 billion euros. Austria, with a 30.7 per cent share, is the largest foreign investor in direct investments, followed by the Germans and the Dutch with 9.4 and 8.8 per cent shares respectively, and then the Croatians and Italians.

Individual examples of foreign investments also indicate that Slovenia is becoming a competitive country since some global multinational companies are deciding to move production to this part of central Europe.

Canadian-Austrian car manufacturing giant Magna is planning to build a new painting facility in northern Slovenia, close to Slovenia’s second-largest city, Maribor, with 400 employees. They will significantly expand the investment in the future.

Japanese multinational companies are also starting to arrive in Slovenia. The leading global manufacturer of industrial robots, Yaskawa, and Japanese corporation Sumimoto Rubber Industries, who will invest in the production of medical elastomers, have selected Slovenia as the location for their new plants in Europe.

The Port of Koper as a logistics hub in central Europe

Slovenia is part of the so-called first-speed Europe – it is a member of NATO, the OECD, the Schengen area and since 2007 of the eurozone. These are all connections to the current core of Europe, which is further proof that the economic and political situation in Slovenia is stable, says Andrew Hunt Vodopivec, a Brit who is familiar with the Slovenian business environment, as he has worked at several leading Slovenian international companies.

Vodopivec points out that some of the most important advantages Slovenia has to offer to foreign investors, including British companies that try to find new locations for their business operations in Europe, are excellent connections with regional and European markets, quality infrastructure, a skilled labour force and high quality of life.

“Slovenia’s location is an excellent starting point for traveling in Central and Eastern Europe, and particularly for expanding to the former Yugoslav area, but it also has good connections with European capitals. From Ljubljana, the capital of Slovenia, you can quickly reach Frankfurt, Milan, Vienna, Brno or Budapest, which is an additional advantage for companies if they want to have efficient control of their business,” Vodopivec adds.

Regarding infrastructure, Vodopivec points out the importance of transport connections and the Slovenian cargo port, the Port of Koper, close to the Italian border, as a logistics and distribution centre for central and Southeastern Europe.

“The Port of Koper is the largest cargo port in the Adriatic. It has been growing so quickly in recent years that it has already surpassed the Port of Trieste, in Italy, with more cargo arriving in Koper, from where Slovenian international companies export goods to Africa, the Middle East, America and Asia.”

Slovenia is also classified high among European countries regarding broadband internet connectivity, and Vodopivec points out the accessibility of industrial and trade zones, which have the required infrastructure for setting up long-lasting investments or high-tech companies.

“I would add a good quality of life. When my friends from Great Britain come to visit, they first notice how green Slovenia is. You have everything in Slovenia – clean air, the sea, lakes, mountains covered in snow, which can be seen from the capital, Ljubljana, and low traffic,” he says.

Investors appreciate the knowledge and work habits of Slovenians

Jacqueline Stewart, manager of Slovenia Invest, from Britain, who is an agent for commercial real estate in Slovenia, puts the highly educated and multilingual workforce at the top of her list of Slovenian advantages. “It is more expensive than in Croatia, Slovakia and other Eastern European members of the Union, but significantly cheaper than in the Netherlands, France or Germany,” she says. In fact, Slovenia is ranked in the top quarter of EU member states regarding foreign languages; 92 percent of Slovenians speak at least one foreign language, and most speak English.

Stewart thinks that Slovenia is particularly attractive for British companies seeking branches in Europe. She believes that the option of large manufacturers moving production to Slovenia is less likely: “Industrial real estate is insufficient, and a labour force is difficult to find with the low unemployment rate in Slovenia,” she says.

One of the advantages is corporate tax that is relatively low, as well as the fact that founding a company in Slovenia is cheap and simple. If investors make large investments in development and employ experts, they can also reduce corporate tax, adds Bojan Ivanc, Chief Economist of the Chamber of Commerce and Industry of Slovenia.

Investors want stable and safe countries

Although Slovenia, with 2 million residents, is a small consumer market, the fact that investors are searching for safe countries these days works in the country’s favor for attracting foreign investments, says the consulting firm A. T. Kearney, which prepares the Global Retail Development Index, featuring the attractiveness of countries for foreign direct investments. “According to information from this year’s index of trust for foreign direct investment, geopolitical tensions present the greatest threat for business managers around the globe. These tensions are the reason why investors are starting to decide to move their investments to safer environments such as Slovenia.”

Slovenia’s export orientation and traditionally strong relations with its most important European economic partners – Germany, Austria and Italy, in particular – are an important advantage. The majority of Slovenian exports go into these countries, where Slovenia generates 70 percent of gross domestic product. “The 4.5 percent forecast for economic growth in 2017 is also very promising as it is above the EU average. Predictions for the next upcoming few years are also good. We want more foreign direct investments from Great Britain into Slovenia,” states the Ministry of Economic Development and Technology.

The Embassy of the Republic of Slovenia in London points out the automotive industry, cleantech, information and communication technology, life sciences, material sciences and tourism as the fastest-growing branches of industry in Slovenia. British companies can pursue their investment goals through the privatization of companies performed by the Slovenian government, and through various infrastructure projects.

The British are warming up for real estate again

When talking about investment opportunities, one must not forget tourism, which is setting new records again this year, and this accelerates purchases of real estate, where British buyers are starting to show up again, says Patrick Davidson, manager and co-owner of Slovenia Property & Development. This has nothing to do with Brexit, but with the fact that traditional tourist destinations, such as Tunisia or Egypt, are becoming less attractive due to safety issues and geopolitical tensions.

“In Slovenia you can get access to good deals, to good pricing; the procedure of buying real estate or founding a company is simple and transparent. British buyers love nature, and Slovenia can be very attractive in this respect. They mostly buy real estate as an investment or they buy their own holiday home for seasonal personal use,” adds Davidson.

According to official statistics, more than three-quarters of all guests from Britain visit Alpine municipalities and Ljubljana; this year’s visits will also be a new record; there was a 14 percent increase in British guests from January to August compared to the same period last year. “The British market presents a great opportunity for Slovenia, since British guests appreciate nature, mountains, gastronomy, culture – all of which we can offer in Slovenia,” says Mladen Ljubišić, head of the Information Office of the Slovenian Tourist Board in London.

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